FINANCING AGREEMENT

Exhibit 10.1

FINANCING AGREEMENT

The CIT Group/Business Credit, Inc.

(as Lender)

and

Xxxxxxx-Xxxxx Nitrogen, Inc.

(as Borrower)

Dated: April 26, 2006

TABLE OF CONTENTS

			Page
SECTION	1.	Definitions	1
	1.1	Defined Terms	1

SECTION	2.	Conditions Precedent	16
	2.1	Conditions Precedent to Initial Funding	16

SECTION	3.	Revolving Loans and Collections	19
	3.1	Funding Conditions and Procedures	19
	3.2	Handling of Proceeds of Collateral; Cash Dominion	20
	3.3	Revolving Loan Account	20
	3.4	Repayment of Overadvances	21
	3.5	Application of Proceeds of Collateral	21
	3.6	Monthly Statement	22
	3.7	Access to ClT’s System	22

SECTION	4.	Intentionally Omitted	23

SECTION	5.	Letters of Credit	23
	5.1	Assistance and Purpose	23
	5.2	Authority to Charge Revolving Loan Account	23
	5.3	Indemnity Relating to Letters of Credit	23
	5.4	Compliance of Goods, Documents and Shipments with Agreed Terms	23
	5.5	Handling of Goods, Documents and Shipments	24
	5.6	Compliance with Laws; Payments of Levies and Taxes	24
	5.7	Subrogation Rights	25

SECTION	6.	Collateral	25
	6.1	Grant of Security Interest	25
	6.2	Limited License	25
	6.3	Representations, Covenants and Agreements Regarding Collateral Generally	25
	6.4	Representations Regarding Accounts and Inventory	26
	6.5	Covenants and Agreements Regarding Accounts and Inventory	26
	6.6	General Intangibles	27
	6.7	Commercial Tort Claims	27
	6.8	Letter of Credit Rights	28
	6.9	Covenants and Agreements Regarding Margin Accounts.	28
	6.10	Reference to Other Loan Documents	28
	6.11	Credit Balances: Additional Collateral	28

SECTION	7.	Representations, Warranties and Covenants	29
	7.1	Representations and Warranties	29
	7.2.	Affirmative Covenants	31
	7.3	Financial Covenants	38
	7.4	Negative Covenants	38

SECTION	8.	Interest, Fees and Expenses	40
	8.1	Interest on Revolving Loans	40
	8.2	Default Interest Rate	40
	8.3	Fees and Expenses Relating to Letters of Credit	40

iii

	8.4	Out of Pocket Expenses	41
	8.5	Line of Credit Fee	41
	8.6	Loan Facility Fee; Application of Deposits and Commitment Fee	41
	8.7	Administrative Management Fee	41
	8.8	Standard Operational Fees	41
	8.9	LIBOR Loans	41
	8.10	LIBOR Breakage Costs and Fees	43
	8.11	Capital Adequacy	44
	8.12	Taxes, Reserves and Other Conditions	44
	8.13	Authority to Charge Revolving Loan Account	45
	8.14	Participations	45
	8.15	Replacement of a Participant	46

SECTION	9.	Powers	46
	9.1	Authority	46
	9.2	Limitations on Exercise	46

SECTION	10.	Events of Default and Remedies	46
	10.1	Events of Default	47
	10.2	Remedies With Respect to Outstanding Loans	48
	10.3	Remedies With Respect to Collateral	48
	10.4	General Indemnity	49

SECTION	11.	Termination	50

SECTION	12.	Miscellaneous	51

	12.1	Waivers	51
	12.2	Entire Agreement; Amendments	51
	12.3	Usury Limit	51
	12.4	Severability	52
	12.5	Waiver of Jury Trial: Service of Process; Consent to Jurisdiction	52
	12.6	Notices	52
	12.7	Choice of Law	53

EXHIBITS

Exhibit A – Form of Compliance Certificate

SCHEDULES

Schedule 1.1(a) – Existing Indebtedness
Schedule 7.l(b) – Company and Collateral Information
Schedule 7.1(f) – Environmental Matters

THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with an office located at 0000 XXX Xxxxxxx, Xxxxx X0, Xxxxxxxxx Xxxxxxx, XX 00000 (“CIT”), is pleased to confirm the terms and conditions under which CIT shall make revolving loans, and other financial accommodations to Xxxxxxx-Xxxxx Nitrogen, Inc., a Delaware corporation, (to be renamed Rentech Energy Midwest Corporation after the Acquisition), (the “Company”), with a principal place of business at c/o Rentech Development Corporation, 0000 00^xx Xxxxxx, Xxxxx 000, Xxxxxx, XX 00000.

RECITAL

Rentech Development Corporation, a Colorado corporation, (“Parent”, as further defined herein) is a wholly owned subsidiary of Rentech Inc, a Colorado corporation (“Rentech”). On or about the Closing Date, Parent has acquired all of the issued and outstanding capital stock of the Company (the “Acquisition”). The funding requirements for the Acquisition will be provided for by a loan by Rentech to Parent (the “Investment”). At the time of the Acquisition the Company will enter into a Distribution Agreement. The Acquisition, the Investment and the execution of the Distribution Agreement are herein collectively referred to as the “Transaction”.

SECTION 1. Definitions

1.1 Defined Terms. In addition to those set forth in the preamble and recital, as used in this Financing Agreement:

Accounts shall mean any and all of the Company’s present and future: (a) accounts (as defined in the UCC); (b) instruments, documents, chattel paper (including electronic chattel paper) (all as defined in the UCC); (c) unpaid seller’s or lessor’s rights (including rescission, replevin, reclamation, repossession and stoppage in transit) relating to the foregoing or arising therefrom; (d) rights to any goods represented by any of the foregoing, including rights to returned, reclaimed or repossessed goods; (e) reserves and credit balances arising in connection with or pursuant to this Financing Agreement; (f) guaranties, other supporting obligations, payment intangibles and letter of credit rights (all as defined in the UCC); (g) insurance policies or rights relating to any of the foregoing; (h) general intangibles pertaining to any of the foregoing (including rights to payment, including those arising in connection with bank and non-bank credit cards), and all books and records and any electronic media and software relating thereto; (i) notes, deposits or other property of the Company’s account debtors securing the obligations owed by such account debtors to the Company; and (j) all Proceeds of any of the foregoing.

Acquisition Agreement shall mean the Stock Purchase Agreement, dated November 5, 2005, by and among Parent and Xxxxxxx-Xxxxx, Inc., a Delaware corporation, setting forth the terms of the Acquisition, as the same has been and may be amended.

Administrative Management Fee shall mean an amount equal to $10,000 per annum, payable in accordance with Section 8.7 of this Financing Agreement.

Applicable Margin shall mean, with respect to (a) the Revolving Loans, 0.25% for Chase Bank Rate Loans and 2.50% for LIBOR Loans, and (b) Letters of Credit, 2.50%.

Availability Reserve shall mean an amount equal to the sum (without duplication) of:

(a) any reserve which CIT may establish from time to time pursuant to the express terms of this Financing Agreement; plus

(b) (i) three (3) months rental payments or similar charges for any of the Company’s leased premises or other Collateral locations for which the Company has not delivered to CIT a landlord’s waiver in form and substance reasonably satisfactory to CIT, and (ii) three (3) months estimated payments (plus any other fees or charges owing by the Company) to any applicable warehousemen or third party processor (as determined by CIT in the exercise of its reasonable business judgment), provided that any of the foregoing amounts shall be adjusted from time to time hereafter upon (x) delivery to CIT of any such acceptable waiver, (y) the opening or closing of a Collateral location and/or (z) any change in the amount of rental, storage or processor payments or similar charges; plus

(c) such other reserves against Net Availability as CIT deems necessary in the exercise of its reasonable business judgment as a result of (i) negative forecasts and/or trends in the Company’s business, industry, profits, operations or financial condition or (ii) other issues, circumstances or facts that would reasonably be expected to otherwise negatively impact the Company or its business, profits, operations, industry, financial condition or assets.

Balance Sheet shall mean a balance sheet for the Company or a consolidated and consolidating balance sheet for Rentech, as the case may be, eliminating all inter-company transactions and prepared in accordance with GAAP.

Borrowing Base shall mean, at any time:

(a) the sum at such time of: (i) eighty five percent (85%) of the Company’s outstanding Eligible Accounts Receivable; plus (ii) (x) during the period of December 1 of each year through March 31 of each following year eighty percent (80%) of the aggregate value of the Eligible Inventory and Eligible Pre-Paid Expense, and (y) during the period of April 1 of each year through November 30 of each year seventy five percent (75%) of the aggregate value of the Eligible Inventory and Eligible Pre-Paid Expense, in each case valued at the lower of cost or market on a first in, first out basis; plus (iii) one hundred percent (100%) of the net liquidation value of Margin Accounts maintained in accordance with Section 6.9 of this Financing Agreement; less

(b) the amount of the Availability Reserve in effect at such time.

Business Day shall mean any day on which CIT and JPMorgan Chase Bank are open for business.

Capital Expenditures shall mean, for any period, the aggregate expenditures of the Company during such period on account of property, plant, equipment or similar fixed assets that, in conformity with GAAP, are required to be reflected on the balance sheet of the Company.

Capital Lease shall mean any lease of property (whether real, personal or mixed) which, in conformity with GAAP, is accounted for as a capital lease or a Capital Expenditure on the balance sheet of the Company.

Casualty Proceeds shall mean (a) payments or other proceeds from an insurance carrier with respect to any loss, casualty or damage to Collateral, and (b) payments received on account of any condemnation or other governmental taking of any of the Collateral.

Change of Control shall mean either: (a) the failure of Rentech, directly or indirectly, to continue to have the power (by ownership of equity interests, by contract or otherwise) to elect a majority of the board of directors of the Company.

Chase Bank Rate shall mean the rate of interest per annum announced by JPMorgan Chase Bank (or its successor) from time to time as its “prime rate” in effect at its principal office in New York City. (The prime rate is not intended to be the lowest rate of interest charged by JPMorgan Chase Bank to its borrowers).

Chase Bank Rate Loans shall mean any loans or advances made pursuant to this Financing Agreement that bear interest based upon the Chase Bank Rate.

CIT’s Bank Account shall mean CIT’s bank account at JPMorgan Chase Bank (or its successor) in New York, New York.

CIT’s System shall mean CIT’s StuckeyNet or other internet-based loan accounting and reporting system.

Closing Date shall mean the date of this Financing Agreement.

Collateral shall mean, collectively, all present and future Accounts, Inventory, Documents of Title, General Intangibles, Investment Property and Other Collateral.

Copyrights shall mean the Company’s present and hereafter acquired copyrights, copyright registrations, recordings, applications, designs, styles, licenses, marks, prints and labels bearing any of the foregoing, all reissues and renewals thereof, all licenses thereof, all other general intangible, intellectual property and other rights pertaining to any of the foregoing, together with the goodwill associated therewith, and all income, royalties and other Proceeds of any of the foregoing.

Default shall mean any event specified in Section 10.1 hereof, regardless of whether any requirement for the giving of notice, the lapse of time, or both, or any other condition, event or act, has occurred or been satisfied.

Default Rate of Interest shall mean a rate of interest equal to two percent (2%) per annum greater than the interest rate accruing on the Obligations pursuant to Section 8.1 hereof, which CIT

shall be entitled to charge the Company in the manner set forth in Section 8.2 of this Financing Agreement.

Depository Account shall mean each bank account (and the related lockbox, if any) subject to CIT’s control that is established by CIT or the Company pursuant to Section 2.1(j) or Section 3.2(c) of this Financing Agreement.

Depository Account Control Agreement shall mean a three-party agreement in form and substance reasonably satisfactory to CIT among CIT, the Company and the bank which will maintain a Depository Account, (a) which provides CIT with control of such Depository Account and provides for the transfer of funds in a manner consistent with the provisions of Section 3.2(b) of this Financing Agreement, and (b) pursuant to which such bank agrees that (i) all cash, checks, wires and other items received or deposited into the Depository Account are the property of CIT, and (ii) except as otherwise provided in the Depository Account Control Agreement, such bank has no lien upon, or right of set off against, the Depository Account and any cash, checks, wires and other items from time to time on deposit therein.

Dilution Percentage shall mean, with respect to the Company for any twelve-month period, the quotient (expressed as a percentage) obtained by dividing (a) the aggregate amount of the Company’s non-cash reductions against Trade Accounts Receivable, during such period, by (b) the average amount of the Company’s gross sales during such period, as determined by CIT in the exercise of its reasonable business judgment. The Dilution Percentage shall be determined by CIT based on its reviews of the periodic financial and collateral reports submitted by the Company to CIT as well as the results of the periodic field examinations of the Company conducted by CIT from time to time.

Distribution Agreement shall mean the Distribution Agreement, dated April 26, 2006, by and among the Company and Xxxxxxx-Xxxxx Resources LLC, a Delaware limited liability company, (or its assignee) setting forth the terms of the sale of certain products by the Company to Xxxxxxx-Xxxxx Resources LLC, or such assignee, as the same may be amended.

Documents of Title shall mean the Company’s present and future documents (as defined in the UCC), and any and all warehouse receipts, bills of lading, shipping documents, chattel paper, instruments and similar documents, all whether negotiable or non-negotiable, together with all Inventory and other Goods relating thereto, and all Proceeds of any of the foregoing.

EBITDA shall mean, for any period, all earnings (a) before all interest, tax obligations and depreciation and amortization expense of the Company for such period, and (b) before the expense of the Company for such period for the fees paid under the Management Agreement, all determined in conformity with GAAP on a basis consistent with the latest audited financial statements of the Company, but excluding the effect of extraordinary and/or nonrecurring gains or losses for such period.

Electronic Transmission shall have the meaning given to such term in Section 7.2(g) of this Financing Agreement.

Eligible Accounts Receivable shall mean the gross amount of the Company’s Trade Accounts Receivable that are subject to a valid, exclusive, first priority and fully perfected security interest in favor of CIT, which conform in all material respects to the warranties contained herein, less, without duplication, the sum of;

(a) actual returns, discounts, claims, credits and allowances of any nature (whether issued, owing, granted, claimed or outstanding), plus

(b) reserves for such Trade Accounts Receivable that arise from, or are subject to or include: (i) sales to the United States of America, any state or other governmental entity or to any agency, department or division thereof, except for any such sales as to which the Company has complied with the Assignment of Claims Act of 1940 or any other applicable statute, rules or regulation to CIT’s satisfaction in the exercise of its reasonable business judgment; (ii) foreign sales, other than sales which otherwise comply with all of the other criteria for eligibility hereunder and are (x) secured by letters of credit (in form and substance satisfactory to CIT) issued or confirmed by, and payable at, banks acceptable to CIT having a place of business in the United States of America, or (y) to customers residing in Canada, provided that such Accounts are payable in United States Dollars; (iii) Accounts that remain unpaid more than the earlier of ninety (90) days from invoice date or sixty (60) days from due date; (iv) contra accounts; (v) sales to any subsidiary (direct or indirect) or parent (direct or indirect) of the Company, or to any other person or entity under common control with the Company or with any shareholder, subsidiary (direct or indirect) or parent (direct or indirect) of the Company in any way; (vi) xxxx and hold (deferred shipment) or consignment sales (until the subject Inventory is actually sold); (vii) sales to any customer which is either (w) insolvent, (x) the debtor in any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings under any federal or state law, (y) negotiating, or has called a meeting of its creditors generally for purposes of negotiating, a compromise of its debts, or (z) financially unacceptable to CIT or has a credit rating unacceptable to CIT in each case in the reasonable business judgment of CIT; (viii) all sales to any customer if twenty-five percent (25%) or more of the aggregate dollar amount of all outstanding invoices to such customer are unpaid more than the earlier of ninety (90) days from invoice date or sixty (60) days from due date; (ix) sales to any customer and/or its affiliates, other than Xxxxxxx-Xxxxx Resources LLC and/or its affiliates, to the extent the aggregate outstanding amount of such sales at the time exceed twenty percent (20%) or more of all Eligible Accounts Receivable at such time; (x) pre-billed receivables and receivables arising from progress xxxxxxxx; and (xi) sales not payable in United States currency; plus

(c) reserves established by CIT to account for increases in the Company’s Dilution Percentage above the Company’s historical Dilution Percentage.

Eligible Inventory shall mean the gross amount of the Company’s Inventory that is subject to a valid, fully perfected security interest in favor of CIT, that is, except as provided herein, an exclusive, first priority security interest and which conforms in all material respects to the warranties contained herein, less, without duplication, (a) all supplies (other than raw materials, including

natural gas), (b) all Inventory not present in the United Stales of America, (c) all Inventory returned or rejected by the Company’s customers (other than goods that are undamaged and resalable in the normal course of business) and goods to be returned to the Company’s suppliers, (d) except to the extent covered by a reserve under Subsection (b) of the definition of Availability Reserve, all Inventory in transit or in the possession of a warehouseman, bailee, third party processor, or other third party, (i) unless the Inventory is held under a Qualified Consignment, (ii) unless such warehouseman, bailee or third party has executed a notice of security interest agreement (in form and substance satisfactory to CIT), or (iii) unless such Inventory is covered by negotiable warehouse receipts or negotiable bills of lading issued by either: (A) a warehouseman licensed and bonded by the United States Department of Agriculture or any state’s Department of Agriculture, or (B) a recognized carrier having an office in the United States and in a financial condition reasonably acceptable to CIT, which receipts or bills of lading designate CIT directly or by endorsement as the only Person to which or to the order of which the warehouseman or carrier is legally obligated to deliver such Inventory, (e) Inventory reasonably determined by CIT to be out-of-condition or otherwise not merchantable, including, without limitation, Inventory deemed to be out-of-condition or otherwise not merchantable by the United States Department of Agriculture, any state’s Department of Agriculture, or any other Governmental Authority having regulatory authority over the Company or any of the Company’s assets or activities; (f) Inventory for which a prepayment has been received, to the extent of such prepayment; (g) any value attributable to the Platinum Catalyst; (h) Inventory which in CIT’s reasonable determination is subject to liens or conflicting claims of ownership (except with regard to Producer Payables that are not past due or the subject of any lien enforcement action), whether such liens or conflicting claims are asserted or could be asserted by any Person; and (i) the amount of such other reserves against Inventory as CIT deems necessary in the exercise of its reasonable business judgment for discontinued, slow-moving and obsolete Inventory (other than Inventory subject to purchase orders or contracts), market value declines, xxxx and hold (deferred shipment), consignment sales, shrinkage and any applicable customs, freight, duties and Taxes.

Eligible Pre-Paid Expenses shall mean the outstanding gross amount paid by the Company in advance of delivery, for natural gas that will meet the standards of Eligible Inventory when delivered, to one or more of the suppliers of natural gas with whom the Company does business on the date of this Financing Agreement, unless CIT shall otherwise consent in writing to one or more new suppliers of natural gas acceptable to CIT, that create contract rights that are subject to a valid, fully perfected security interest in favor of CIT, that is, except as provided herein, an exclusive, first priority security interest and which conforms in all material respects to the warranties contained herein, less, without duplication, the sum of: (a) contra accounts; (b) amounts pre-paid to any subsidiary (direct or indirect) or parent (direct or indirect) of the Company, or to any other person or entity under common control with the Company or with any shareholder, subsidiary (direct or indirect) or parent (direct or indirect) of the Company in any way; (c) amounts pre-paid to any supplier which is either (w) insolvent, (x) the debtor in any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings under any federal or state law, (y) negotiating, or has called a meeting of its creditors for purposes of negotiating, a compromise of its debts, or (z) financially unacceptable to CIT or has a credit rating unacceptable to CIT in each case in the reasonable business judgment of CIT; (d) amounts pre-paid to any supplier that (x) has breached or

otherwise materially failed to perform any material obligations to the Company or (y) has declared that it will breach or otherwise materially fail to perform any material obligations to the Company.

Equipment shall mean the Company’s present and hereafter acquired equipment (as defined in the UCC) including, without limitation, all machinery, equipment, rolling stock, furnishings and fixtures, and all additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto and all Proceeds of any of the foregoing.

ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.

Eurocurrency Reserve Requirements shall mean for any day, as applied to a LIBOR Loan, the aggregate (without duplication) of the maximum rates of reserve requirement (expressed as a decimal fraction) in effect with respect to CIT and/or any present or future lender or participant on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under Regulation D or any other applicable regulations of the Board of Governors of the Federal Reserve System or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect, dealing with reserve requirements prescribed for Eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board) maintained by CIT and/or any such lenders or participants (such rates to be adjusted to the nearest one-sixteenth of one percent (1/16 of 1%) or, if there is not a nearest one-sixteenth of one percent (1/16 of 1%), to the next higher one sixteenth of one percent (1/16 of 1%).

Event(s) of Default shall have the meaning given to such term in Section 10.1 of this Financing Agreement.

Farm Products shall mean the Company’s present and hereafter acquired farm products (as defined in the UCC) including, without limitation, all personal property used or for use in farming or livestock operations, including without limitation, seed and harvested or un-harvested crops of all types and descriptions, whether annual or perennial and including trees, vines and the crops growing thereon, native grass, grain, feed, feed additives, feed ingredients, feed supplements, fertilizer, hay, silage, supplies (including without limitation, chemicals, veterinary supplies and related Goods), livestock of all types and descriptions (including without limitation, the offspring of such livestock and livestock in gestation).

Fixed Charge Coverage Ratio shall mean, for any period, the quotient (expressed as a ratio) obtained by dividing (a) EBITDA of the Company for such period by (b) Fixed Charges of the Company for such period.

Fixed Charges shall mean, for any period, the sum of (without duplication) (a) all interest obligations (including the interest component of Capital Leases) of the Company paid or due during such period, (b) the amount of all scheduled fees paid to CIT during such period, excluding the Loan Facility Fee, (c) the amount of principal repaid or scheduled to be repaid on Indebtedness of the Company (other than the Revolving Loans) during such period, (d) unfinanced Capital Expenditures,

as incurred by the Company during such period, (e) all federal, state and local income tax expenses due and payable by the Company during such period; and (f) the fees paid by the Company under the Management Agreement during such period.

GAAP shall mean generally accepted accounting principles in the United States of America as in effect from time to time and for the period as to which such accounting principles arc to apply.

General Intangibles shall mean the Company’s present and hereafter acquired general intangibles (as defined in the UCC), and shall include, without limitation, all present and future right, title and interest in and to: (a) all Trademarks, (b) Patents, utility models, industrial models, and designs, (c) Copyrights, (d) trade secrets, (e) licenses, permits and franchises, (f) any other forms of intellectual property, (g) all customer lists, distribution agreements, supply agreements, blueprints, indemnification rights, tax refunds and other contract rights, (h) obligations for capital stock or other claims against any equity holders, (i) all monies and claims for monies now or hereafter due and payable in connection with the foregoing, including, without limitation, payments for infringement and royalties arising from any licensing agreement between the Company and any licensee of any of the Company’s General Intangibles, and (j) all Proceeds of any of the foregoing.

Goods shall mean the Company’s present and hereafter acquired “Goods”, as defined in the UCC, and all Proceeds thereof.

Governmental Authority shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including without limitation, any arbitration panel, any court, any commission, any agency or any instrumentality of the foregoing.

Governmental Requirement shall mean any material law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement of any federal, state, county, municipal, parish, provincial or other Governmental Authority or any department, commission, board, court, agency or any other instrumentality of any of them (including any of the foregoing that relate to environmental standards or controls and occupational safety and health standards or controls).

Guaranties shall mean the guaranty agreements executed and delivered to CIT by Guarantors.

Guarantors shall mean Parent and any other future guarantor of all or any part of the Obligations.

Indebtedness shall mean, without duplication, all liabilities, contingent or otherwise, which are either (a) obligations in respect of borrowed money or for the deferred purchase price of property, services or assets, other than trade payables incurred in the ordinary course of business, or (b) obligations with respect to Capital Leases.

Indemnified Party shall have the meaning given to such term in Section 10.4 of this Financing Agreement.

Intangible Assets means, with respect to any Person, that portion of the book value of all of such Person’s assets that would be treated as intangibles under GAAP, which shall not include loan closing transaction costs.

Interest Period shall mean, subject to availability: (a) with respect to an initial request by the Company for a LIBOR Loan or the conversion of a Chase Bank Rate Loan to a LIBOR Loan, at the option of the Company a one-month, two-month, three-month, six-month or twelve-month period commencing on the borrowing or conversion date with respect to such LIBOR Loan and ending one month, two months, three months, six months or twelve months thereafter, as applicable; and (b) with respect to any continuation of a LIBOR Loan, at the option of the Company a one-month, two-month three-month, six-month or twelve-month period commencing on the last day of the immediately preceding Interest Period applicable to such LIBOR Loan and ending one month, two months, three months, six months or twelve months thereafter, as applicable; provided that (i) if any Interest Period would otherwise end on a day which is not a Working Day, such Interest Period shall be extended to the next succeeding Working Day, and (ii) if any Interest Period begins on the last Working Day of any month, or on a day for which there is no numerically corresponding day in the month in which such Interest Period ends, such Interest Period shall end on the last Working Day of the month in which such Interest Period ends.

Inventory shall mean the Company’s present and hereafter acquired inventory (as defined in the UCC) and Farm Products including, without limitation, all merchandise and inventory in all stages of production (from raw materials through work-in-process to finished goods), and all additions, substitutions and replacements thereof, wherever located, together with all goods and materials used or usable in manufacturing, processing, packaging or shipping of the foregoing, and all Proceeds of any of the foregoing.

Investment Property shall mean all present and hereafter acquired “Investment Property”, as defined in the UCC, including, without limitation, Margin Accounts, together with all stock and other equity interests in the Company’s subsidiaries, and all Proceeds thereof.

Issuing Bank shall mean any bank issuing a Letter of Credit for the Company.

Letters of Credit shall mean all letters of credit issued for or on behalf of the Company with the assistance of CIT by an Issuing Bank in accordance with Section 5 hereof.

Letter of Credit Guaranty shall mean any guaranty or similar agreement delivered by CIT to an Issuing Bank of the Company’s reimbursement obligation under such Issuing Bank’s reimbursement agreement, application for letter of credit or other like document.

Letter of Credit Guaranty Fee shall mean the fee that CIT may charge the Company under Section 8.3 (a) of this Financing Agreement for issuing a Letter of Credit Guaranty or otherwise assisting the Company in obtaining Letters of Credit.

Letter of Credit Sub-Line shall mean the commitment of CIT to assist the Company in obtaining Letters of Credit in an aggregate amount of up to $15,000,000.

LIBOR shall mean, for any Interest Period and subject to availability for the applicable Interest Period, a rate of interest equal to the quotient obtained by dividing: (a) at CIT’s election, (i) LIBOR for such Interest Period as quoted to CIT by JPMorgan Chase Bank (or any successor thereof) two (2) Business Days prior to the first day of such Interest Period, or (ii) the rate of interest determined by CIT at which deposits in U.S. Dollars are offered for such Interest Period as presented on Telerate Systems at page 3750 as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period (provided that if two or more offered rates are presented on Telerate Systems at page 3750 for such Interest Period, the arithmetic mean of all such rates, as determined by CIT, will be the rate elected); by (b) a number equal to 1.00 minus the Eurocurrency Reserve Requirements, if any, in effect on the day which is two (2) Business Days prior to the beginning of such Interest Period.

LIBOR Interest Payment Date shall mean, with respect to any LIBOR Loan, the last day of the Interest Period for such LIBOR Loan and, if the Interest Period with respect to such LIBOR Loan exceeds three months, the day which is three months, six months and nine months after the making of such LIBOR Rate Loan, as the case may be.

LIBOR Lending Office shall mean the office of JPMorgan Chase Bank, or any successor thereof, maintained at 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000.

LIBOR Loan shall mean any loans made pursuant to this Financing Agreement that bear interest based upon LIBOR.

Line of Credit Fee shall mean, for any month, the product obtained by multiplying (a) (i) the amount of the Revolving Line of Credit minus (ii) the average daily principal balance of Revolving Loans and the average daily undrawn amount of Letters of Credit outstanding during such month, times (b) one quarter of one percent (0.25%) per annum for the number of days in said month.

Loan Documents shall mean this Financing Agreement, the Guaranties, the other closing documents executed by the Company or the Guarantors, and any other ancillary loan and security agreements executed by the Company or the Guarantors from time to time in connection with this Financing Agreement, all as may be renewed, amended, restated or supplemented from time to time.

Loan Facility Fee shall mean the fee payable to CIT in accordance with, and pursuant to, the provisions of Section 8.6 of this Financing Agreement.

Management Agreement shall mean that certain Management Services Agreement, dated as of the Closing Date between Parent and the Company providing for the payment of a quarterly fee to the Parent in return for the services described therein.

Margin Accounts shall mean, collectively, the Company’s present and hereafter acquired Commodity Accounts (as defined in the UCC) and Commodity Contracts (as defined in the UCC).

Material Adverse Effect shall mean a material adverse effect on either (a) the business, condition (financial or otherwise), operations, performance, and properties of the Company, (b) the ability of the Company to perform its obligations under this Financing Agreement and the other Loan Documents, or to enforce its rights against account debtors of the Company, (c) the value of the Collateral taken as a whole or (d) the ability of CIT to enforce the Obligations or its rights and remedies under this Financing Agreement or any of the other Loan Documents.

Net Availability shall mean, at any time, the amount by which (a) the Borrowing Base of the Company at such time exceeds (b) the sum at such time of (i) the principal amount of all outstanding Revolving Loans, plus (ii) the undrawn amount of all outstanding Letters of Credit.

Obligations shall mean: (a) all loans, advances and other extensions of credit made by CIT to the Company or to others for the Company’s account (including, without limitation, all Revolving Loans and all obligations of CIT under Letter of Credit Guaranties); (b) any and all other indebtedness, obligations and liabilities which may be owed by the Company to CIT and arising out of, or incurred in connection with, this Financing Agreement or any of the other Loan Documents (including all Out-of-Pocket Expenses and any applicable Documentation Fees), whether (i) now in existence or incurred by the Company from time to time hereafter, (ii) secured by pledge, lien upon or security interest in any of the Company’s assets or property or the assets or property of any other person, firm, entity or corporation, (iii) such indebtedness is absolute or contingent, joint or several, matured or unmanned, direct or indirect, or (iv) the Company is liable to CIT for such indebtedness as principal, surety, endorser, guarantor or otherwise; (c) all indebtedness, obligations and liabilities owed by the Company to CIT under any other agreement or arrangement now or hereafter entered into between the Company, on the one hand, and CIT, on the other hand, whether or not such agreement or arrangement relates to the transactions contemplated by this Financing Agreement; (d) indebtedness, obligations and liabilities incurred by, or imposed on, CIT as a result of environmental claims relating to the Company’s operations, premises or waste disposal practices or disposal sites; (e) the Company’s liabilities to CIT as maker or endorser on any promissory note or other instrument for the payment of money; and (f) the Company’s liabilities to CIT under any instrument of guaranty or indemnity, or arising under any guaranty, endorsement or undertaking which CIT may make or issue to others for the Company’s account, including any accommodations extended by CIT with respect to applications for Letters of Credit, CIT’s acceptance of drafts or CIT’s endorsement of notes or other instruments for the Company’s account and benefit.

Other Collateral shall mean: (a) the Company’s present and hereafter established lockbox, blocked account and other deposit accounts maintained with any bank or financial institution into which the proceeds of Collateral are or may be deposited (including the Depository Accounts); (b) the Company’s cash and other monies and property in the possession or control of CIT (including negative balances in the Revolving Loan Account and cash collateral held by CIT pursuant to this Financing Agreement); (c) the Company’s books, records, ledger cards, disks and related data processing software at any time evidencing or containing information relating to any of the Collateral

described herein or otherwise necessary or helpful in the collection thereof or realization thereon; and (d) all Proceeds of any of the foregoing.

Out-of-Pocket Expenses shall mean all of CIT’s present and future costs, fees and expenses incurred in connection with this Financing Agreement and the other Loan Documents, including, without limitation, (a) the cost of lien searches (including tax lien and judgment lien searches), pending litigation searches and similar items, (b) fees and taxes imposed in connection with the filing of any financing statements or other personal property security documents; (c) all costs and expenses incurred by CIT in opening and maintaining the Depository Accounts and any related lockboxes, depositing checks, and receiving and transferring funds (including charges imposed on CIT for “insufficient funds” and the return of deposited checks); (d) any amounts paid by, incurred by or charged to CIT by an Issuing Bank under any Letter of Credit or the reimbursement agreement relating thereto, any application for Letter of Credit, Letter of Credit Guaranty or other like document which pertains either directly or indirectly to Letters of Credit, and CIT’s standard fees relating to the Letters of Credit and any drafts thereunder; (e) all appraisal fees and expenses payable by the Company hereunder, and all costs, fees and expenses incurred by CIT as provided under Section 7.2(a) hereof; (f) all costs that CIT may incur to maintain the Required Insurance; (g) all reasonable costs, fees, expenses and disbursements of outside counsel hired by CIT to consummate the transactions contemplated by this Financing Agreement (including the documentation and negotiation this Financing Agreement, the other Loan Documents and all amendments, supplements and restatements thereto or thereof), and to advise CIT as to matters relating to the transactions contemplated hereby; (h) all costs, fees and expenses incurred by CIT in connection with any action taken under Section 10.3 hereof: and (i) without duplication, all costs, fees and expenses incurred by CIT in connection with the collection, liquidation, enforcement, protection and defense of the Obligations, the Collateral and CIT’s rights under this Financing Agreement, including, without limitation, all reasonable fees and disbursements of in-house and outside counsel to CIT incurred as a result of a workout, restructuring, reorganization, liquidation, insolvency proceeding and in any appeals arising therefrom, whether incurred before, during or after the termination of this Financing Agreement or the commencement of any case with respect to the Company, any Guarantor or any subsidiary of the Company (as the case may be) under the United States Bankruptcy Code or any similar statute.

Overadvances shall mean, at any time, the amount by which (a) the sum at such time of the principal amount of all outstanding Revolving Loans plus the undrawn amount of all outstanding Letters of Credit exceeds (b) the Borrowing Base at such time.

Parent shall mean Rentech Development Corporation as long as it owns the capital stock or other equity interests of the Company, and thereafter shall mean its assignee permitted under the terms of the Loan Documents, provided that such assignee becomes a Guarantor by executing and delivering to CIT a guaranty agreement in replacement of the guaranty agreement of the prior Parent, together with such other documents as CIT may reasonably require.

Patents shall mean the Company’s present and hereafter acquired patents, patent applications, registrations, all reissues and renewals thereof, all licenses thereof, all inventions and

improvements claimed thereunder, all general intangible, intellectual property and other rights of the Company with respect thereto, and all income, royalties and other Proceeds of the foregoing.

Permitted Encumbrances shall mean: (a) all liens existing on the Closing Date on specific items of Equipment and Real Estate except those to be released according to the terms of the Acquisition; (b) Purchase Money Liens; (c) statutory liens of landlords and liens of carriers, warehousemen, bailees, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and securing amounts not delinquent (or which are being contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens), and with respect to which adequate reserves or other appropriate provisions are being maintained by the Company or a Guarantor in accordance with GAAP; (d) statutory liens securing Producer Payables incurred in the ordinary course of business, that are not past due or the subject of any lien enforcement action (unless they are being contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens) (e) liens granted to CIT; (f) deposits made (and the liens thereon) in the ordinary course of business (including, without limitation, security deposits for leases, indemnity bonds, surety bonds) in connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), leases, statutory obligations and other similar obligations arising as a result of progress payments under government contracts; (g) security deposits made (and the liens thereon) in the ordinary course of business of the Company for indemnity bonds, surety bonds and appeal bonds, in each case, in connection with judgments, provided that such deposits combined with the amount of liens referred to in the following subsection do not exceed $250,000 in the aggregate at any time; (h) liens of judgment creditors, provided that such liens do not exceed $250,000 in the aggregate at any time (other than liens bonded or insured to the reasonable satisfaction of CIT and in compliance with the preceding subsection); (i) Permitted Tax Liens; and (j) easements (including, without limitation, reciprocal easement agreements and utility agreements), encroachments, minor defects or irregularities in title, variation and other restrictions, charges or encumbrances (whether or not recorded) affecting Real Estate, and which in the aggregate (i) do not materially interfere with the occupation, use or enjoyment by the Company of its business or property so encumbered and (ii) in the reasonable business judgment of CIT, do not materially and adversely affect the value of such Real Estate.

Permitted Indebtedness shall mean; (a) Indebtedness (including Capital Leases) secured by Purchase Money Liens; (b) Indebtedness arising under the Letters of Credit and this Financing Agreement; (c) deferred Taxes and other expenses incurred in the ordinary course of business; (d) Subordinated Debt and (e) other Indebtedness existing on the Closing Date and listed on Schedule 1.1 (a) attached hereto.

Permitted Tax Liens shall mean liens for Taxes not delinquent and liens for Taxes that the Company is contesting in good faith, by appropriate proceedings which are sufficient to prevent imminent foreclosure of such liens, and with respect to which adequate reserves are being maintained by the Company in accordance with GAAP; provided that in either case, such liens (a) are not filed of record in any public office, or (b) do not secure taxes owed to the United States of

America (or any department or agency thereof) or any State or State authority, if applicable law provides for the priority of such tax liens.

Person shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, provincial, county, city, municipal or otherwise, including without limitation, any instrumentality, division, agency, body or department thereof).

Platinum Catalyst shall mean, the gauze made of platinum and rhodium used as a catalyst in the Company’s ammonia oxidation converters for the production of nitric acid, now owned or hereafter acquired by the Company.

Proceeds shall have the meaning given to such term in the UCC, including, without limitation, all Casualty Proceeds.

Producer Payables shall mean all amounts at any time payable by the Company for the purchase of Inventory.

Proposal Letter shall mean the Proposal Letter dated March 20, 2006 issued by CIT and accepted by Parent on behalf of the Company.

Purchase Money Liens shall mean liens on any item of Equipment or interests in Real Estate acquired by the Company after the date of this Financing Agreement, provided that (a) each such lien shall attach only to the Equipment or interest acquired and proceeds thereof, and (b) the indebtedness incurred by the Company in connection with such acquisitions shall not exceed $2,000,000 in any fiscal year of the Company.

Qualified Consignment shall mean a consignment of Inventory by the Company (as consignor) that meets the following qualifications: (a) the consignment is made (i) under the Distribution Agreement, or (ii) to a consignee disclosed to CIT in writing prior to the consignment and reasonably acceptable to CIT, (b) the Company has appropriately filed a UCC-1 Financing Statement against the consignee and has taken all other actions required under the applicable Uniform Commercial Code in order to have the equivalent of a perfected purchase money security interest in the consigned inventory, (c) the consignee has executed a notice of security interest agreement (in form and substance reasonably satisfactory to CIT), and (d) the Company maintains audit procedures reasonably acceptable to CIT to verify the existence and proper maintenance of the consigned Inventory.

Real Estate shall mean all of the Company’s present and future fee and leasehold interests in real property.

Regulatory Change shall mean any change after the Closing Date in United States federal, state or foreign law or regulation (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System), or the adoption or making after the Closing Date of any interpretation, directive or request applying to a class of lenders including CIT of or under any

United States federal, state or foreign law or regulation, in each case whether or not having the force of law and whether or not failure to comply therewith would be unlawful.

Required Insurance shall have the meaning provided for in Section 7.2(c) of this Financing Agreement.

Revolving Line of Credit shall mean the commitment of CIT to make Revolving Loans pursuant to Section 3 of this Financing Agreement and assist the Company in opening Letters of Credit pursuant to Section 5 of this Financing, in an aggregate amount equal to $30,000,000.

Revolving Loan Account shall mean the account on CIT's books, in the Company’s name, in which the Company will be charged with all Obligations when due or incurred by CIT.

Revolving Loans shall mean the loans and advances made from time to time to or for the account of the Company by CIT pursuant to Section 3 of this Financing Agreement.

Subordinated Debt shall mean all indebtedness of the Company (and the note (8) evidencing such indebtedness) that is subordinated to the prior payment and satisfaction of the Obligations pursuant to a Subordination Agreement.

Subordination Agreement shall mean (a) an agreement (in form and substance satisfactory to CIT) among the Company, a subordinating creditor and CIT, pursuant to which Subordinated Debt is subordinated to the prior payment and satisfaction of the Obligations, and (b) any note, indenture, note purchase agreement or similar instrument or agreement, pursuant to which the indebtedness evidenced thereby or issued thereunder is subordinated to the Obligations by the express terms of such note, indenture, note purchase agreement or similar instrument or agreement.

Tangible Net Worth shall mean, as of any date of determination, the result of (a) the total stockholder’s equity of the Company determined in accordance with GAAP on a basis consistent with the latest financial statements of the Company, minus (b) the sum of (i) all Intangible Assets of the Company, (ii) all of the Company’s prepaid expenses, and (iii) all amounts due to Company from affiliates, plus (c) the principal amount of the Subordinated Debt.

Taxes shall mean all federal, state, municipal and other governmental taxes, levies, charges, claims and assessments which are or may be owed or collected by the Company with respect to its business, operations, Collateral or otherwise.

Termination Date shall mean the date occurring three (3) years from the Closing Date and the same date in every year thereafter.

Trade Accounts Receivable shall mean that portion of the Company’s Accounts which arises from the sale of Inventory or the rendition of services in the ordinary course of the Company’s business.

Trademarks shall mean the Company’s present and hereafter acquired trademarks, trademark registrations, recordings, applications, tradenames, trade styles, corporate names, business names, service marks, logos and any other designs or sources of business identities, prints and labels (on which any of the foregoing may appear), all reissues and renewals thereof, all licenses thereof, all other general intangible, intellectual property and other rights pertaining to any of the foregoing, together with the goodwill associated therewith, and all income, royalties and other Proceeds of any of the foregoing.

UCC shall mean the Uniform Commercial Code as the same may be amended and in effect from time to time in the State of New York.

Working Day shall mean any Business Day on which dealings in foreign currencies and exchanges between banks may be transacted.

SECTION 2. Conditions Precedent

2.1 Conditions Precedent to Initial Funding. The obligation of CIT to make the initial loans and to assist the Company in obtaining initial Letters of Credit hereunder, immediately prior to or concurrently with the making of such loans or the issuance of such Letters of Credit, is subject to the satisfaction or waiver in writing by CIT of the following conditions precedent:

(a) Lien Searches. CIT shall have received tax lien, judgment lien and Uniform Commercial Code searches from all jurisdictions reasonably required by CIT, and such searches shall verify that CIT has a first priority security interest in the Collateral, subject to Permitted Encumbrances.

(b) Casualty Insurance. The Company shall have delivered to CIT evidence satisfactory to CIT that all Required Insurance is in full force and effect, and CIT shall have confirmed that CIT has been named as a loss payee or additional insured with respect to the Required Insurance in a manner satisfactory to CIT.

(c) UCC Filings. All UCC financing statements and similar documents required to be filed in order to create in favor of CIT a first priority and exclusive perfected security interest in the Collateral (to the extent that such a security interest may be perfected by a filing under the UCC or applicable law), shall have been properly filed in each office in each jurisdiction required, CIT shall have received (i) acknowledgement copies of all such filings (or, in lieu thereof, CIT shall have received other evidence satisfactory to CIT that all such filings have been made), and (ii) evidence that all necessary filing fees, taxes and other expenses related to such filings have been paid in full.

(d) Resolutions. CIT shall have received a copy of the resolutions of the Board of Directors of the Company authorizing the execution, delivery and performance of the Loan Documents to be executed by the Company, certified by the Secretary or Assistant Secretary of the Company as of the date hereof, together with a certificate of such Secretary or Assistant Secretary as to the incumbency and signature of the officer(s) executing the Loan Documents on behalf of the Company. CIT shall have received a copy of resolutions of the board of directors of Parent

authorizing the execution, delivery and performance of the Loan Documents to be executed by Parent as of the date hereof.

(e) Organizational Documents. CIT shall have received a copy of the Certificate or Articles of Incorporation of the Company, certified by the applicable authority in the Company’s State of incorporation, and copies of the by-laws (as amended through the date hereof) of the Company, certified by the Secretary or an Assistant Secretary thereof. CIT shall have received a copy of the Certificate or Articles of Incorporation of Parent, certified by the applicable authority in the Parent’s State of organization, and copies of the by-laws (as amended through the date hereof) of Parent, certified by the Secretary or Assistant Secretary of Parent.

(f) Officer’s Certificate. CIT shall have received an executed Officer’s Certificate for the Company, satisfactory in form and substance to CIT, certifying that as of the Closing Date (i) the representations and warranties contained herein are true and correct in all material respects, (ii) the Company is in compliance with all of the terms and provisions set forth herein and (iii) no Default or Event of Default has occurred.

(g) Disbursement Authorizations. The Company shall have delivered to CIT all information necessary for CIT to issue wire transfer instructions on behalf of the Company for the initial and subsequent loans and/or advances to be made under this Financing Agreement, including disbursement authorizations in form acceptable to CIT.

(h) Examination & Verification; Net Availability; Projections. CIT shall have completed and be satisfied with an updated examination and verification of the Trade Accounts Receivable, Inventory and the books and records of the Company, and such examination shall indicate that (i) after giving effect to all loans, advances and extensions of credit to be made at closing, the Company shall have opening Net Availability of not less than $4,000,000, and (ii) no material adverse change has occurred in the financial condition, business, prospects, profits, operations or assets of the Company and the Guarantors taken as a whole since December 31,2005, other than the incurrence of Indebtedness in connection with the Acquisition. In addition, the Company shall have delivered to CIT, and CIT shall be satisfied with, balance sheet, income statement, cash flows and Net Availability projections for the Company for not less than twelve (12) months following the Closing Date.

(i) Depository Accounts: Payment Direction. On or before the tenth (10th) day following the Closing Date, (i) The Company or CIT shall have established one or more Depository Accounts with respect to the collection of Accounts and the deposit of proceeds of Collateral, and (ii) CIT, the Company and each depository bank shall have entered into a Depository Account Control Agreement with respect to each Depository Account.

(j) Guaranty and Related Documents. The Guarantors shall have executed and delivered to CIT (i) the Guaranties and (ii) the items described in Sections 2.1 (d), 2.1 (e) and 2.1(1) hereof with respect to the Guarantors.

(k) Opinions. Subject to the filing, priority and remedies provisions of the UCC, the provisions of the Bankruptcy Code, insolvency statutes or other like laws, the equity powers of a court of law and such other matters as may be agreed upon with CIT, counsel for the Company and the Guarantors shall have delivered to CIT opinion(s) satisfactory to CIT opining, inter alia, that each Loan Document to which the Company or any Guarantor is a party is valid, binding and enforceable in accordance with its terms, as applicable, and that the execution, delivery and performance by the Company and each Guarantor of the Loan Documents to which such person or entity is a party are (i) duly authorized (except with regard to the guaranty agreement of Parent), (ii) do not violate any terms, provisions, representations or covenants in the articles of incorporation, by-laws or other organizational agreement of the Company or such Guarantor, as the case may be, and (iii) to the best knowledge of such counsel, do not violate any terms, provisions, representations or covenants in any material loan agreement, mortgage, deed of trust, note, security agreement or indenture to which the Company or any Guarantor is a signatory, or by which the Company or any Guarantor (or any of the Company’s or any Guarantor’s assets) are hound. On or before the tenth (10^th) day following the Closing Date, counsel for Parent shall have delivered to CIT an opinion satisfactory to CIT opining, inter alia, that the guaranty agreement of Parent is duly authorized.

(l) Legal Restraints/Litigation. As of the Closing Date, there shall be no (x) injunction, writ or restraining order restraining or prohibiting the consummation of the financing arrangements contemplated under this Financing Agreement, or (y) suit, action, investigation or proceeding (judicial or administrative) pending against the Company, any Guarantor, or any of their assets, which, in the opinion of CIT, if adversely determined, could reasonably be expected to have a Material Adverse Effect.

(m) Additional Documents. The Company shall have executed and delivered to CIT the Loan Documents necessary to consummate the lending arrangement contemplated by this Financing Agreement.

(n) Background Checks. CIT shall have received and be satisfied with background checks on key managers of the Company as CIT shall designate.

(o) Proposal Letter. The Company shall have fully complied with all of the terms and conditions of the Proposal Letter.

(p) Environmental Reports. CIT shall have received environmental reports on all Real Estate and, if required by CIT, the Company’s waste disposal practices. The reports must be satisfactory to CIT and must not disclose or indicate any liability (real or potential) arising out of the Company’s premises, its operations, its waste disposal practices or waste disposal sites used by Company, which could reasonably be expected to have a Material Adverse Effect.

(q) Closing of the Transaction. A copy of the fully executed Acquisition Agreement, the Distribution Agreement, and, in each case, related documents shall have been delivered to CIT. The Acquisition Agreement, the Distribution Agreement and other documentation related to, and the terms of, the Transaction shall all be in form and substance satisfactory to CIT. The conditions of closing the Transaction (other than the closing of this Financing Agreement and the funding of the initial Revolving Loans as provided for by this Financing Agreement) shall be satisfied or waived by the parties to the Transaction.

Upon the execution of this Financing Agreement and the initial disbursement of the initial loans hereunder, all of the above conditions precedent shall have been deemed satisfied, except as set forth as to post closing conditions or except as the Company and CIT shall otherwise agree in a separate writing.

SECTION 3. Revolving Loans and Collections

3.1 Funding Conditions and Procedures.

(a) Amounts and Requests. Subject to the terms and conditions of this Financing Agreement, CIT agrees to make loans and advances to the Company on a revolving basis (i.e. subject to the limitations set forth herein, the Company may borrow, repay and re-borrow Revolving Loans). In no event shall CIT have an obligation to make a Revolving Loan to the Company, nor shall the Company be entitled to request or receive a Revolving Loan, if (i) a Default or Event of Default shall have occurred and remain outstanding on the date of request for such Revolving Loan or the date of the funding thereof, (ii) the amount of such Revolving Loan, when added to the principal amount of the Revolving Loans outstanding plus the undrawn amount of all Letters of Credit on the date of the funding thereof, would exceed the Revolving Line of Credit, or (iii) amount of such Revolving Loan would exceed the Net Availability of the Company on the date of the request therefor or the funding thereof. Any request for a Revolving Loan must be received by an officer of CIT no later than 1:00 p.m., Eastern time, (a) on the Business Day on which such Revolving Loan is required, if the request is for a Chase Bank Rate Loan, or (b) three (3) Business Days prior to the Business Day on which such Revolving Loan is required, if the request is for a LIBOR Loan. The funding of any LIBOR Loan is also subject to the satisfaction of the conditions set forth in Section 8.9 of this Financing Agreement.

(b) Phone and Electronic Loan Requests. The Company hereby authorizes CIT to make Revolving Loans to the Company based upon a telephonic or e-mail request (or, if permitted by CIT, based upon a request posted on CIT’s System) made by any officer or other employee of the Company that the Company has authorized in writing to request Revolving Loans hereunder, as reflected by CIT’s records. Each telephonic, e-mail or posted request by the Company shall be irrevocable, and the Company agrees to confirm any such request for a Revolving Loan in a writing approved by CIT and signed by such authorized officer or employee, within one (1) Business Day of CIT’s request for such confirmation. CIT shall have the right to rely on any telephonic, e-mail or posted request for a Revolving Loan made by anyone purporting to be an officer or other employee of the Company that the Company has authorized in writing to request Revolving Loans hereunder, without further investigation.

(c) Reaffirmation of Representations and Warranties. Except for the representations and warranties set forth in Sections 6.7, 6.8, 6.9 and 7.1, all of the representations and warranties made by the Company in this Financing Agreement shall be deemed to be remade by the Company each time that the Company requests a Revolving Loan or a Letter of Credit under this Financing Agreement (provided that any representation and warranty made as of a specific earlier date shall only be remade as of such date), and each such request shall also constitute a representation and warranty by the Company that, after giving effect to the requested Revolving Loan or Letter of Credit, no Default or Event of Default shall have occurred and remain outstanding.

3.2 Handling of Proceeds of Collateral: Cash Dominion.

(a) Collection of Accounts and Other Proceeds. The Company, at its expense, will enforce and collect payments and other amounts owing on all Accounts in the ordinary course of the Company’s business subject to the terms hereof. Commencing on or before the tenth (10^th) day following the Closing Date, the Company agrees to direct its account debtors to send payments on all Accounts to the Company and, to promptly deposit such payments and other cash Proceeds of Collateral in a Depository Account. Until so deposited, the Company agrees to hold such cash Proceeds of Collateral in trust for CIT, separate from the Company’s other property and funds.

(b) Transfer of Funds from Depository Accounts. Funds remaining on deposit in a Depository Account shall be transferred to CIT’s Bank Account on each Business Day in accordance with the terms and provisions of the applicable Depository Account Control Agreement, and the Company agrees to take all actions reasonably required by CIT or any bank at which a Depository Account is maintained in order to effectuate the transfer of funds in this manner. All amounts received by CIT from a Depository Account and any other proceeds of the Collateral deposited into CIT’s Bank Account will, for purposes of calculating Net Availability and interest, be credited to the Revolving Loan Account on the date of deposit in CIT’s Bank Account. No checks, drafts or other instruments received by CIT shall constitute final payment to CIT unless and until such instruments have actually been collected.

(c) New Depository Accounts. The Company agrees not to open any lockbox or new bank account into which Proceeds of Collateral are to be delivered or deposited unless concurrently with the opening of such lockbox and/or bank account, CIT, the Company and the bank which will maintain such lockbox or at which such account will be maintained, execute a Depository Account Control Agreement with respect to such lockbox and/or related bank account. Upon compliance with the terms set forth above, such lockbox and/or bank account shall constitute a Depository Account for purposes of this Financing Agreement.

3.3 Revolving Loan Account. CIT shall charge the Revolving Loan Account for all loans and advances made by CIT to the Company or for the Company’s account, and for all any other Obligations, including Out-of-Pocket Expenses, when due and payable hereunder. Subject to the provisions of Section 3.5 below, CIT will credit the Revolving Loan Account with all amounts received by CIT from each Depository Account or from others for the Company’s account, including, as set forth above, all amounts received by CIT in payment of Accounts, and such amounts will be

applied to payment of the Obligations in the order and manner set forth herein. In no event shall prior recourse to any Account or other security granted to or by the Company be a prerequisite to CIT’s right to demand payment of any of the Obligations. In addition, the Company agrees that CIT shall have no obligation whatsoever to perform in any respect any of the Company’s contracts or obligations relating to the Accounts.

3.4 Repayment of Overadvances, If at any time (a) the sum of the outstanding balance of Revolving Loans and undrawn amount of Letters of Credit exceed the Revolving Line of Credit, or (b) an Overadvance exists, the amount of such excess (in the case of clause (a)) or the amount of the Overadvance (in the case of clause (b)) shall be immediately due and payable, unless CIT otherwise agrees in writing. Should CIT for any reason honor requests for Overadvances, such Overadvances shall be made in CIT’s sole discretion and subject to any additional terms CIT deems necessary.

3.5 Application of Proceeds of Collateral.

(a) Generally. Unless this Financing Agreement expressly provides otherwise, so long as no Event of Default shall have occurred and remain outstanding, CIT agrees to apply all Proceeds of Collateral to the Revolving Loan Account.

(b) Application of Proceeds to Chase Bank Rate Loans and LIBOR Loans. So long as no Event of Default shall have occurred and remain outstanding, CIT agrees to apply all Proceeds of Collateral and other payments described in Section 3.5(a) to Chase Bank Rate Loans until there are no Chase Bank Rate Loans outstanding, and then to LIBOR Loans; provided that in the event the aggregate outstanding principal amount of Revolving Loans that are LIBOR Loans exceeds the lesser of the Revolving Line of Credit or the Borrowing Base, CIT may apply all proceeds of Collateral received by CIT to the payment of the Obligations in such manner and in such order as CIT may elect in the exercise of its reasonable business judgment. Subject to the terms of the preceding sentence, so long as no Event of Default shall have occurred and remain outstanding, if CIT receives Proceeds of Collateral or other payments that exceed the outstanding principal amount of Revolving Loans that are Chase Bank Rate Loans, the Company may request, in writing, that CIT not apply such excess Proceeds to outstanding Revolving Loans that are LIBOR Loans, in which case CIT shall remit such excess to the Company. If as a result of the application of the provisions of this Section 3.5(b). any Proceeds of Collateral are applied to loans that are LIBOR Loans, such application shall be treated as a prepayment of such LIBOR Loans and CIT shall be entitled to the costs and fees provided for in Section 8.10 hereof.

(c) Application of Proceeds During an Event of Default If an Event of Default shall have occurred and remain outstanding, CIT may apply all Proceeds of Collateral and all other payments received by CIT to the payment of the Obligations in such manner and in such order as CIT may elect in its sole discretion. If as a result of the application of the provisions of this Section 3.5(c), any Proceeds or payments are applied to loans that are LIBOR Loans, such application shall be treated as a prepayment of such LIBOR Loans and CIT shall be entitled to the costs and fees provided for in Section 8.10 hereof.

3.6 Monthly Statement. After the end of each month, CIT agrees to prepare and make available to the Company (by mail, facsimile, e-mail or posting to CIT’s System, as mutually agreed to by the Company and CIT), a statement showing the accounting for the charges, loans, advances and other transactions occurring between CIT and the Company during that month. Absent manifest error, each monthly statement shall be deemed correct and binding upon the Company and shall constitute an account stated between the Company and CIT unless CIT receives a written statement of exception from the Company within thirty (30) days after the receipt of such monthly statement.

3.7 Access to CIT’s System. CIT shall provide to the Company access to CIT’s System during normal business hours, for the purposes of (i) obtaining information regarding loan balances and Net Availability, and (ii) if permitted by CIT, making requests for Revolving Loans and submitting borrowing base certificates. Such access shall be subject to the following terms, in addition to all terms set forth on the website for CIT’s System:

(a) CIT shall provide to the Company an initial password for secured access to CIT’s System. The Company shall provide CIT with a list of officers and employees that are authorized from time to time to access CIT’s System, and the Company agrees to limit access to the password and CIT’s System to such authorized officers and employees. After the initial access, the Company shall be solely responsible for (i) changing and maintaining the integrity of the Company’s password and (ii) any unauthorized use of the Company’s password or CIT’s System by the Company’s officers and employees.

(b) The Company shall use CIT’s System and the Company’s information thereon solely for the purposes permitted above, and shall not access CIT’s System for the benefit of third parties or provide any information obtained from CIT’s System to third parties, in each case, other than affiliates, agents, attorneys and accountants of the Company. CIT makes no representation that loan balance or Net Availability information is or will be available, accurate, complete, correct or current at all times. CIT’s System may be inoperable or inaccessible from time to time, whether for required website maintenance, upgrades to CIT’s System, or for other reasons, and in any such event the Company must obtain loan balance and Net Availability information, and (if permitted by CIT) make requests for Revolving Loans and submit borrowing base certificates using other available means.

(c) The Company hereby confirms and agrees that CIT’s System consist of proprietary software, data, tools, scripts, algorithms, business logic, website designs and interfaces and related intellectual property, information and documentation. CIT’s System and related intellectual property, information and documentation are the sole and exclusive property of CIT, and the Company shall have no right, title or interest therein or thereto, except for the limited right to access CIT’s System for the purposes permitted above. Upon termination of this Financing Agreement, the Company agrees to cease any use of CIT’s System.

(d) All agreements, covenants and representations and warranties made by the Company in any borrowing base certificate submitted to CIT by means of CIT’s System are incorporated herein by reference.

SECTION 4. Intentionally Omitted

SECTION 5. Letters of Credit

In order to assist the Company in establishing or opening Letters of Credit with an Issuing Bank, the Company has requested that CIT join in the applications for such Letters of Credit, and/or guarantee payment or performance of such Letters of Credit and any drafts or acceptances thereunder through the issuance of one or more Letter of Credit Guaranties, thereby lending ClT’s credit to the Company, and CIT has agreed to do so. These arrangements shall be handled by CIT subject to satisfaction of the conditions set forth in Section 2.1 hereof and the terms and conditions set forth below.

5.1 Assistance and Purpose. Within the Revolving Line of Credit and subject to sufficient Net Availability, CIT shall assist the Company in obtaining Letters of Credit in an aggregate undrawn amount outstanding at any time not to exceed the Letter of Credit Sub-Line. The term, form and purpose of each Letter of Credit and all documentation in connection therewith, and any amendments, modifications or extensions thereof, must be mutually acceptable to CIT, the Issuing Bank and the Company, Notwithstanding any other provision of this Financing Agreement to the contrary, if a Default or an Event of Default shall have occurred and remain outstanding, CIT’s assistance in connection with any Letter of Credit shall be in CIT’s sole discretion.

5.2 Authority to Charge Revolving Loan Account. The Company hereby authorizes CIT, without notice to the Company, to charge the Revolving Loan Account with the amount of all indebtedness, liabilities and obligations of any kind incurred by CIT under a Letter of Credit Guaranty, including the charges of an Issuing Bank, as such indebtedness, liabilities and obligations are charged to or paid by CIT, or, if earlier, upon the occurrence of an Event of Default, Any amount charged to the Revolving Loan Account shall be deemed a Chase Bank Rate Loan hereunder and shall incur interest at the rate provided in Section 8.1 (or Section 8.2. if applicable) of this Financing Agreement. The Company confirms that any charges which CIT may make to the Revolving Loan Account as provided herein will be made as an accommodation to the Company and solely at CIT’s discretion.

5.3 Indemnity Relating to Letters of Credit The Company unconditionally indemnifies CIT and holds CIT harmless from any and all loss, claim or liability incurred by CIT arising from any transactions or occurrences relating to Letters of Credit established or opened for the Company’s account, the Collateral relating thereto and any drafts or acceptances thereunder, and all Obligations thereunder, including any such loss, claim or liability arising from any error, omission, negligence, misconduct or other action taken by an Issuing Bank, other than for any such loss, claim or liability arising out of the gross negligence or willful misconduct by CIT with respect to a Letter of Credit Guaranty, This indemnity shall survive the termination of this Financing Agreement and the repayment of the Obligations.

5.4 Compliance of Goods. Documents and Shipments with Agreed Terms. CIT shall not be responsible for: (a) the existence, character, quality, quantity, condition, packing, value or delivery of the goods purporting to be represented by any documents relating to any Letter of

Credit; (b) any difference or variation in the character, quality, quantity, condition, packing, value or delivery of the goods from that expressed in such documents; (c) the validity, sufficiency or genuineness of such documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (d) the time, place, manner or order in which shipment is made; (e) partial or incomplete shipment, or failure or omission to ship any or all of the goods referred to in the Letters of Credit or documents relating thereto; (f) any deviation from instructions; (g) delay, default, or fraud by the shipper and/or anyone else in connection with the goods or the shipping thereof; or (h) any breach of contract between the shipper or vendors and the Company.

5.5 Handling of Goods. Documents and Shipments. The Company agrees that any action taken by CIT, if taken in good faith, or any action taken by the Issuing Bank of whatever nature, under or in connection with the Letters of Credit, the Letter of Credit Guaranties, drafts or acceptances relating to Letters of Credit, or the goods subject thereto, shall be binding on the Company and shall not result in any liability whatsoever of CIT to the Company. CIT shall have the full right and authority, in CIT's name, to (a) clear and resolve any questions of non-compliance of documents, (b) give any instructions as to acceptance or rejection of any documents or goods, (c) execute any and all steamship or airway guaranties (and applications therefor), indemnities or delivery orders, (d) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and (e) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, the Letters of Credit, the Letter of Credit Guaranties or drafts or acceptances relating to Letters of Credit. An Issuing Bank shall be entitled to comply with and honor any and all such documents or instruments executed by or received solely from CIT, without any notice to or any consent from the Company. Notwithstanding any prior course of conduct or dealing with respect to the foregoing (including amendments to and non-compliance with any documents, and/or the Company’s instructions with respect thereto), CIT may exercise its rights under this Section 5.5 in its sole but reasonable business judgment. In addition, the Company agrees not to: (a) at any time, (i) execute any application for steamship or airway guaranties, indemnities or delivery orders, (ii) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances or documents, or (iii) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letters of Credit, drafts or acceptances; and (b) if an Event of Default shall have occurred and remain outstanding, (i) clear and resolve any questions of non-compliance of documents or (ii) give any instructions as to acceptances or rejection of any documents or goods.

5.6 Compliance with Laws: Payment of Levies and Taxes. The Company agrees that (a) all necessary import and export licenses and certificates necessary for the Company’s import or handling of the Collateral will be promptly procured, (b) all Governmental Requirements in regard to the shipment and importation of the Collateral by the Company or the financing thereof will be promptly and fully complied with, and (c) copies of any such licenses or certificates that CIT may at any time request will be promptly furnished to CIT. In connection herewith, the Company represents and warrants to CIT that all shipments made under any Letter of Credit are and will be in compliance with all applicable Governmental Requirements except where failure to be in compliance could not reasonably be expected to have a Material Adverse Effect, and are not prohibited by any such

Governmental Requirements. The Company assumes all risk, liability and responsibility for, and agrees to pay and discharge, all present and future local, state, federal or foreign Taxes, duties, or levies pertaining to the importation and delivery of the Collateral. Any embargo or Governmental Requirement, where the Collateral is or may be located, or wherein payments are to be made, or wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely the Company’s risk, liability and responsibility.

5.7 Subrogation Rights. Upon any payments made to an Issuing Bank under a Letter of Credit Guaranty, CIT shall acquire by subrogation, any rights, remedies, duties or obligations granted to or undertaken by the Company to the Issuing Bank in any application for Letter of Credit, any standing agreement relating to Letters of Credit or otherwise, all of which shall be deemed to have been granted to CIT and apply in all respects to CIT and shall be in addition to any rights, remedies, duties or obligations contained herein.

SECTION 6. Collateral

6.1 Grant of Security Interest (a) As security for the prompt payment in full of all Obligations, the Company hereby pledges and grants to CIT a continuing general lien upon, and security interest in, all of the Collateral.

(b) Extent of Security Interests. The security interests granted hereunder shall extend and attach to:

(i) all Collateral which is presently in existence or hereafter acquired and which is owned by the Company or in which the Company has any interest, whether held by the Company or by others for the Company’s account, and wherever located, and

(ii) all Inventory and any portion thereof which may be returned, rejected, reclaimed or repossessed by either CIT or the Company from the Company’s customers, as well as to all supplies, goods, incidentals, packaging materials, labels and any other items which contribute to the finished goods or products manufactured or processed by the Company, or to the sale, promotion or shipment thereof.

6.2 Limited License. Regardless of whether CIT’s security interests in any of the General Intangibles has attached or is perfected, the Company hereby irrevocably grants to CIT a royalty-free, non-exclusive license to use the Company’s Trademarks, Copyrights, Patents and other proprietary and intellectual property rights, in connection with the (i) advertisement for sale, and the sale or other disposition of, any finished goods Inventory by CIT in accordance with the provisions of this Financing Agreement, and (ii) the manufacture, assembly, completion and preparation for sale of any unfinished Inventory by CIT in accordance with the provisions of this Financing Agreement.

6.3 Representations. Covenants and Agreements Regarding Collateral Generally.

(a) Representations and Warranties. The Company hereby represents and warrants to CIT that except for Permitted Encumbrances, (i) upon the filing of UCC financing statements

covering the Collateral in all required jurisdictions, this Financing Agreement creates a valid, perfected, first priority and exclusive security interest in all personal property Collateral of the Company as to which perfection may be achieved by filing, (ii) CIT’s security interests in the Collateral constitute, and will at all times constitute, first priority and exclusive liens on the Collateral, and (iii) the Company is, or will be at the time additional Collateral is acquired by the Company, the absolute owner of the Collateral with full right to pledge, sell, transfer and create a security interest therein, free and clear of any and all claims or liens other than Permitted Encumbrances.

(b) Covenants. The Company, at its expense, agrees to forever warrant and defend the Collateral from any and all claims and demands of any other person, other than holders of Permitted Encumbrances.

6.4 Representations Regarding Accounts and Inventory. The Company represents and warrants to CIT that:

(a) each Trade Account Receivable is based on an actual and bona fide sale and delivery of Inventory or rendition of services to customers, made by the Company in the ordinary course of its business;

(b) the Inventory being sold and the Trade Accounts Receivable created by such sales are the exclusive property of the Company and are not subject to any lien, consignment arrangement (other than a Qualified Consignment), encumbrance, security interest or financing statement whatsoever, other than Permitted Encumbrances;

(c) the invoices evidencing such Trade Accounts Receivable are in the name of the Company;

(d) with respect to Trade Accounts Receivable the customers of the Company have accepted the Inventory or services, owe and are obligated to pay the full amounts stated in the invoices according to their terms, without dispute, offset, defense, counterclaim or contra, except for disputes and other matters arising in the ordinary course of business of which the Company has notified CIT pursuant to Section 7.2(g) hereof within the time required thereby; and

(e) the Company’s Inventory is marketable in the ordinary course of the Company’s business, and no Inventory has been produced in violation of the Fair Labor Standards Act (29 U.S.C. §201 et seq.), as amended.

6.5 Covenants and Agreements Regarding Accounts and Inventory.

(a) The Company confirms to CIT that all Taxes and fees relating to the Company’s business, the Company’s sales, and the Accounts or Inventory relating thereto, are the Company’s sole responsibility, and that same will be paid by the Company prior to delinquency, subject to Section 7.2(d) hereof, and that none of said Taxes or fees represents a lien on or claim against the Accounts, other than a Permitted Tax Lien.

(b) The Company agrees not to acquire any Inventory on a consignment basis, nor co- mingle its Inventory with any goods of its customers or any other person (whether pursuant to any xxxx and hold sale or otherwise, except for a Qualified Consignment).

(c) The Company agrees to maintain such books and records regarding Accounts and Inventory as CIT reasonably may require and agrees that the books and records of the Company will reflect CIT’s interest in the Accounts and Inventory. In support of the continuing security interest of CIT in the Accounts and Inventory, the Company also agrees to deliver to CIT all of the schedules, reports and other information described in Section 7.2(g) of this Financing Agreement. The Company’s failure to maintain its books in the manner provided herein or to deliver to CIT any of the foregoing information shall in no way affect, diminish, modify or otherwise limit the security interests granted to CIT in the Accounts and Inventory.

(d) The Company agrees to issue credit memoranda promptly after accepting returns or granting allowances, and to deliver to CIT copies of such credit memoranda as and when required to do so under Section 7.2(g) hereof.

(e) The Company agrees to safeguard, protect and hold all Inventory for CIT’s account and to make no sale or other disposition thereof except in the ordinary course of the Company’s business, on open account and on commercially reasonable terms consistent with the Company’s past practices. Notwithstanding the ordinary course of the Company’s business and the Company’s past practices, and except for a Qualified Consignment, the Company agrees not to sell Inventory on a consignment basis, nor retain any lien on or security interest in any Inventory sold by the Company. As to any sale or other disposition of Inventory, CIT shall have all of the rights of an unpaid seller, including stoppage in transit, replevin, rescission and reclamation. The Company agrees to handle all Proceeds of sales of Inventory in accordance with the provisions of Section 3.2 hereof.

6.6 General Intangibles. The Company represents and warrants to CIT that as of the date hereof, the Company possesses all General Intangibles necessary to conduct the Company’s business as presently conducted. The Company agrees to maintain the Company’s rights in, and the value of, all such General Intangibles, and to pay when due all payments required to maintain in effect any licensed rights material to its business. The Company shall provide CIT with adequate notice of the acquisition of rights with respect to any additional Patents, Trademarks and Copyrights so that CIT may, to the extent permitted under the documentation granting such rights or applicable law, perfect its security interest in such rights in a timely manner.

6.7 Commercial Tort Claims. The Company represents and warrants to CIT that as of the date hereof, the Company holds no interest in any commercial tort claim. If the Company at any time holds or acquires a commercial tort claim, the Company agrees to promptly notify CIT in writing of the details thereof, and in such writing the Company shall grant to CIT a security interest in such commercial tort claim and in the Proceeds thereof, all upon the terms of this Financing Agreement.

6.8 Letter of Credit Rights. The Company represents and warrants to CIT that as of the date hereof, the Company is not the beneficiary of any letter of credit. If the Company becomes a beneficiary under any letter of credit, the Company agrees to promptly notify CIT, and upon request by CIT, the Company agrees to either (a) cause the issuer of such letter of credit to consent to the assignment of the proceeds of such letter of credit to CIT pursuant to an agreement in form and substance satisfactory to CIT, or (b) cause the issuer of such letter of credit to name CIT as the transferee beneficiary of such letter of credit.

6.9 Covenants and Agreements Regarding Margin Accounts. All of the Company’s Margin Accounts shall be kept with one or more brokers reasonably acceptable to CIT (in each case the “Broker”). The Company represents and warrants to CIT that, with respect to each Margin Account established by the Company: (a) the Company is and shall be the owner, free and clear of all liens, security interests and encumbrances, except for those in favor of CIT or Broker and Permitted Encumbrances, of any and all of the Company’s Margin Accounts; and (b) except as otherwise permitted by this Financing Agreement, the Company owns no open futures positions which arc not either covered by existing, unsold Inventory or covered by reciprocal contracts for future delivery of the product by reliable sellers, or directly related to Inventory which the Company plans to purchase in the ordinary course of the Company’s business. The Company warrants that the Company’s Margin Accounts will be used solely for the hedging of the Company’s investments in Inventory and not for speculative purposes. With respect to any Margin Accounts opened after the Closing Date, the Company, the Broker and CIT shall execute an Assignment of Commodity Accounts and Commodity Contracts, in a standard form reasonably acceptable to CIT and the Broker. All of ClT’s rights under such Assignment of Commodity Accounts and Commodity Contracts shall be in addition to ClT’s rights hereunder, and shall also apply to any of the Company’s Margin Accounts that are maintained, in violation of this Financing Agreement, with any Person other than the Broker.

6.10 Reference to Other Loan Documents. Reference is hereby made to the other Loan Documents for additional representations, covenants and other agreements of the Company regarding the Collateral covered by such Loan Documents.

6.11 Credit Balances; Additional Collateral.

(a) The rights and security interests granted to CIT hereunder shall continue in full force and effect, notwithstanding the termination of this Financing Agreement or the fact that the Revolving Loan Account may from time to time be temporarily in a credit position, until the termination of this Financing Agreement and the full and final payment and satisfaction of the Obligations. Any reserves or balances to the credit of the Company (in the Revolving Loan Account or otherwise), and any other property or assets of the Company in the possession of CIT, may be held by CIT as Other Collateral, and applied in whole or partial satisfaction of such Obligations when due, subject to the terms of this Financing Agreement. The liens and security interests granted to CIT herein and any other lien or security interest which CIT may have in any other assets of the Company secure payment and performance of all present and future Obligations.

(b) Notwithstanding ClT’s security interests in the Collateral, to the extent that the Obligations are now or hereafter secured by any assets or property other than the Collateral, or by the

guaranty, endorsement, assets or property of any other person, CIT shall have the right in its sole discretion to determine which rights, security, liens, security interests or remedies CIT shall at any time pursue, foreclose upon, relinquish, subordinate, modify or take any other action with respect to, without in any way modifying or affecting any of such rights, security, liens, security interests or remedies, or any of CIT’s rights under this Financing Agreement.

SECTION 7. Representations, Warranties and Covenants

7.1 Initial Disclosure Representations and Warranties. The Company represents and warrants to CIT that as of the date hereof:

(a) Financial Condition. (i) The amount of the Company’s assets, at fair valuation, exceeds the book value of the Company’s liabilities, (ii) the Company is generally able to pay its debts as they become due and payable, and (iii) the Company does not have unreasonably small capital to carry on its business as currently conducted absent extraordinary and unforeseen circumstances. All financial statements of the Company previously furnished to CIT present fairly, in all material respects, the financial condition of the Company as of the date of such financial statements, subject to year end adjustments and the absence of footnotes.

(b) Organization Matters: Collateral Locations. Schedule 7.l (b) attached hereto correctly and completely sets forth (w) the Company’s exact name, as currently reflected by the records of the Company’s State of incorporation or formation, (x) the Company’s State of incorporation or formation, (y) the Company’s federal employer identification number and State organization identification number (if any), and (z) the address of the Company’s chief executive office and all locations of Collateral.

(c) Power and Authority; Conflicts; Enforceability.

(i) The Company has full power and authority to execute and deliver this Financing Agreement and the other Loan Documents to which it is a party, and to perform all of the Company’s obligations thereunder.

(ii) The execution and delivery by the Company of this Financing Agreement and the other Loan Documents to which it is a party, and the performance of the Company’s obligations thereunder, have been duly authorized by all necessary corporate or other relevant action, and do not (w) require any consent or approval of any director, shareholder, partner or member of the Company that has not been obtained, (x) violate any term, provision or covenant contained in the organizational documents of the Company (such as the certificate or articles of incorporation, certificate of origin, partnership agreement, by-laws or operating agreement), (y) violate, or cause the Company to be in default under, any Governmental Requirement applicable to the Company or its assets, or (z) violate any term, provision, covenant or representation contained in, or constitute a default under, or result in the creation of any lien under, any loan agreement, lease, indenture, mortgage, deed of trust, note, security agreement or pledge agreement to which the Company is a signatory or by which the Company or any of the Company’s assets are bound or affected, except in

each case where such violation or default could not reasonably be expected to have a Material Adverse Effect.

(iii) This Financing Agreement and the other Loan Documents to which the Company is a party constitute legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent transfer and other laws affecting creditors’ rights generally, and subject to general principles of equity, regardless of whether considered in a proceeding at law or in equity.

(d) Schedules. Each of the Schedules attached to this Financing Agreement set forth a true, correct and complete description of the matter or matters covered thereby.

(e) Compliance with Laws. The Company and the Company’s properties are in compliance with all Governmental Requirements, except to the extent the failure to so comply would not have a Material Adverse Effect. The Company has obtained and maintains all permits, approvals, authorizations and licenses necessary to conduct its business as presently conducted, except to the extent the failure to have such permits, approvals, authorizations or licenses would not have a Material Adverse Effect.

(f) Environmental Matters. Except as set forth on Schedule 7.1(f), or as could not reasonably be expected to have a Material Adverse Effect:

(i) None of the operations of the Company are the subject of any federal, state or local investigation to determine whether any remedial action is needed to address the presence or disposal of any environmental pollution, hazardous material or environmental clean-up of the Real Estate or any of the Company’s leased real property. No enforcement proceeding, complaint, summons, citation, notice, order, claim, litigation, investigation, letter or other written communication from a federal, state or local authority has been filed against or delivered to the Company, regarding or involving any release of any environmental pollution or hazardous material on any real property now or previously owned or operated by the Company.

(ii) The Company has no known contingent liability with respect to any release of any environmental pollution or hazardous material on any real property now or previously owned or operated by the Company.

(iii) The Company is in compliance with all applicable environmental Governmental Requirements, except to the extent that the failure to so comply would not have a Material Adverse Effect.

(g) Pending Litigation. Except as previously disclosed by the Company to CIT in writing, there exist no actions, suits or proceedings of any kind by or against the Company pending in any court or before any arbitrator or governmental body, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

7.2 Affirmative Covenants. Until the termination of this Financing Agreement and the full and final payment and satisfaction of the Obligations:

(a) Maintenance of Financial Records; Inspections. The Company agrees to maintain books and records pertaining to the Company’s financial matters in accordance with GAAP. The Company agrees that CIT or its agents may enter upon the Company’s premises at any time during normal business hours and upon reasonable prior notice, and from time to time, but unless an Event of Default exists, no more than four (4) times each year, in order to (i) examine and inspect the books and records of the Company, and make copies thereof and take extracts therefrom, and (ii) verify, inspect and perform physical counts and other valuations of the Collateral and any and all records pertaining thereto. The Company irrevocably authorizes all accountants and third parties to disclose and deliver directly to CIT, at the Company’s expense, subject to any rights of such accountants or third parties to refuse to so disclose or deliver on any basis other than lack of such authorization, all financial statements and information, books, records, work papers and management reports generated by them or in their possession regarding the Company or the Collateral. After and during the continuance of an Event of Default, and in addition to the Administrative Management Fees payable hereunder, all costs, fees and expenses incurred by CIT in connection with such examinations, inspections, physical counts and other valuations, including reasonable travel, meal and lodging expenses of CIT personnel, shall constitute Out-of-Pocket Expenses.

(b) Further Assurances. The Company agrees to comply with the requirements of all state and federal laws in order to grant to CIT valid and perfected first priority security interests in the Collateral, subject only to the Permitted Encumbrances. CIT is hereby authorized by the Company to file any financing statements, continuations and amendments covering the Collateral without the Company’s signature in accordance with the provisions of the UCC. The Company hereby consents to and ratifies the filing of any financing statements covering the Collateral by CIT on or prior to the Closing Date. The Company agrees to do whatever CIT reasonably may request from time to time, by way of (i) filing notices of liens, financing statements, amendments, renewals and continuations thereof, (ii) cooperating with CIT’s agents and employees, (iii) keeping Collateral records, (iv) transferring proceeds of Collateral to CIT’s possession in accordance with the terms hereof and (v) performing such further acts as CIT reasonably may require in order to effect me purposes of this Financing Agreement, including the execution of control agreements with respect to Depository Accounts and Investment Property.

(c) Insurance and Condemnation.

(i) Required Insurance. The Company agrees to maintain insurance on the Real Estate, Equipment and Inventory under such policies of insurance, with such insurance companies, in such reasonable amounts and covering such insurable risks as are at all times reasonably satisfactory to CIT in the exercise of its reasonable business judgment (the “Required Insurance”). All policies covering the Inventory are, subject to the rights of any holder of a Permitted Encumbrance having priority over the security interests of CIT, to be made payable solely to CIT, in case of loss, under a standard non-contributory “secured party” or “lender’s loss payable” clause or endorsement, and are to contain such other provisions as CIT reasonably may require to fully protect CIT’s interest in Inventory and to any payments to be made under such policies. Each loss payable endorsement in

favor of CIT shall provide (x) for not less than thirty (30) days prior written notice to CIT of the exercise of any right of cancellation and (y) that CIT’s right to payment under any property insurance policy will not be invalidated by any act or neglect of, or any breach of warranty or condition by, the Company or any other party. If an Event of Default shall have occurred and remain outstanding, CIT, subject to the rights of any holder of a Permitted Encumbrance having priority over the security interests of CIT, shall have the sole right, in the name of CIT or the Company, to file claims under any insurance policies relating to the Collateral, to receive, receipt and give acquittances for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies.

(ii) CIT’s Purchase of Insurance. Unless the Company provides CIT with evidence of the Required Insurance on Inventory in the manner set forth in Section 7.2(c)(i) above, CIT may purchase insurance at the Company’s expense to protect CIT’s interests in Inventory, The insurance purchased by CIT may, but need not, protect the Company’s interests in Inventory, and therefore such insurance may not pay any claim which the Company may make or any claim which is made against the Company in connection with the Inventory. The Company may later request that CIT cancel any insurance purchased by CIT, but only after providing CIT with satisfactory evidence that the Company has the Required Insurance. If CIT purchases insurance covering all or any portion of the Inventory, the Company shall be responsible for the costs of such insurance, including interest (at the applicable rate set forth hereunder) and other charges accruing on the purchase price therefor, until the effective date of the cancellation or the expiration of the insurance, and CIT may charge all of such costs, interest and other charges to the Revolving Loan Account. The costs of the premiums of any insurance purchased by CIT may exceed the costs of insurance that the Company may be able to purchase on its own. In the event that CIT purchases insurance, CIT will notify the Company of such purchase within thirty (30) days after the date of such purchase. If, within thirty (30) days after the date of receipt of such notice, the Company provides CIT with proof that the Company had the Required Insurance as of the date on which CIT purchased insurance and the Company has continued at all times thereafter to have the Required Insurance, then CIT agrees to cancel the insurance purchased by CIT and credit the Revolving Loan Account for the amount of all costs, interest and other charges associated with such insurance that CIT previously charged to the Revolving Loan Account.

(iii) Application of Insurance and Condemnation Proceeds. So long as no Default or Event of Default shall have occurred and remain outstanding as of the date of CIT’s receipt of any Casualty Proceeds:

(w) In the event of any loss or damage to any Inventory by condemnation, fire or other casualty, CIT agrees to apply the Casualty Proceeds first to repay the outstanding Revolving Loans.

(x) In the event of any loss or damage to any item of Collateral other than Inventory by condemnation, fire or other casualty, if the Casualty Proceeds relating to such condemnation, fire or other casualty are less than or equal to $250,000, CIT agrees to apply such Casualty Proceeds to repay the outstanding Revolving Loans.

(d) Payment of Taxes. The Company agrees to pay when due all Taxes lawfully levied, assessed or imposed upon the Company or the Collateral (including all sales taxes collected by the Company on behalf of the Company’s customers in connection with sales of Inventory and all payroll taxes collected by the Company on behalf of the Company’s employees), unless the Company is contesting such Taxes in good faith, by appropriate proceedings, and is maintaining adequate reserves for such Taxes in accordance with GAAP. Notwithstanding the foregoing, if a lien securing any Taxes is filed in any public office and such lien is not a Permitted Tax Lien, then the Company shall pay all Taxes secured by such lien immediately and remove such lien of record promptly. Pending the payment of such Taxes and removal of such lien, CIT may, at its election and without curing or waiving any Event of Default which may have occurred as a result thereof, (i) establish an Availability Reserve in the amount of such Taxes (or such lesser amount as CIT shall deem appropriate in the exercise of its reasonable business judgment) or (ii) unless the Company is contesting such Taxes as permitted herein, pay such Taxes on behalf of the Company, and the amount paid by CIT shall become an Obligation which is due and payable on demand by CIT.

(e) Compliance With Laws.

(i) The Company agrees to comply with all Governmental Requirements, if the failure to so comply would have a Material Adverse Effect, provided that the Company may contest Governmental Requirements unless CIT has notified the Company that, in the exercise of its reasonable business judgment, such contest will materially and adversely effect CIT’s rights or priorities in the Collateral.

(ii) Without limiting the generality of the foregoing, the Company agrees to comply with all environmental Governmental Requirements, as presently existing or as adopted or amended in the future, applicable to the ownership and/or use of its real property and operation of its business, if the failure to so comply would have a Material Adverse Effect. The Company shall not be deemed to have breached any provision of this Section 7.2(e) if (x) the failure to comply with the requirements of this Section 7.2(e) resulted from good faith error or innocent omission, (y) the Company promptly commences and diligently pursues a cure of such breach and (z) such failure is cured within thirty (30) days following the Company’s receipt of notice from CIT of such failure, or if such breach cannot in good faith be cured within thirty (30) days following the Company’s receipt of such notice, then such breach is cured within a reasonable time frame based on the extent and nature of the breach and the necessary remediation, and in conformity with any applicable consent order, consensual agreement and applicable law.

(iii) The Company agrees to furnish to CIT, upon request by CIT, copies of any documents relating to any audits or inspections of the Company conducted by any Governmental Authority.

(f) Notices Concerning Environmental. Employee Benefit and Pension Matters. The Company agrees to notify CIT in writing of:

(i) any expenditure (actual or anticipated) in excess of $500,000 for environmental clean-up, environmental compliance or environmental testing and the impact of said expenses on the Company’s working capital;

(ii) the Company’s receipt of written notice from any local, state or federal authority advising the Company of any environmental liability (real or potential) arising from the Company’s operations, its premises, its waste disposal practices, or waste disposal sites used by the Company if such liability could reasonably be expected to have a Material Adverse Effect; and

(iii) the Company’s receipt of written notice from any governmental agency or any sponsor of any “multiemployer plan” (as that term is defined in ERISA) to which the Company has contributed, relating to any of the events described in Section 10.1 (g) hereof.

The Company agrees to provide CIT promptly with copies of all such notices and other information pertaining to any matter set forth above if CIT reasonably so requests.

(g) Collateral Reporting and Information. (i) The Company agrees to furnish to CIT:

(1) At least once each week (but more frequently upon CIT’s reasonable request), a borrowing base certificate in form and substance reasonably satisfactory to CIT, certified by the treasurer or chief financial officer of the Company (or any other authorized officer satisfactory to CIT), together with such confirmatory schedules of Trade Accounts Receivable and Inventory (in form and substance reasonably satisfactory to CIT) as CIT reasonably may request. CIT, in its sole discretion, may permit the Company to access CIT’s System for the purpose (in addition to those set forth in Section 3.7) of completing and submitting borrowing base certificates when required hereunder.

(2) On or before the 20th day of each month other than the first month of each fiscal year of the Company, and on or before the last day of the first month of each fiscal year of the Company (but more frequently upon CIT’s reasonable request), a detailed and summary aging report of Trade Accounts Receivable existing as of the last day of the preceding month, a roll-forward of Trade Accounts Receivable from the first day of the preceding month through the last day of the preceding month, and a summary of Inventory as of the last day of the preceding month, all in such form as CIT reasonably shall require, certified by the treasurer or the chief financial officer of the Company (or any other authorized officer satisfactory to CIT), together with (x) a reconciliation, as of the last day of the preceding month, of the Company’s Trade Accounts Receivable aging report to the Company’s general ledger and applicable borrowing base certificate delivered by the Company to CIT, and (z) if required by CIT, such other information sufficient to allow CIT to update the amount of Eligible Accounts Receivable and Eligible Inventory.

(3) On or before the 20th day of each month other than the first month of each fiscal year of the Company, and on or before the last day of the first month of each fiscal year of the Company (but more frequently upon CIT’s reasonable request), an aged trial balance of all the Company’s accounts payable as of the last day of the preceding month.

(4) Prompt written disclosure of (x) all matters (other than general economic conditions or matters affecting the industry generally) adversely affecting the value, enforceability or collectibility of any material amount of the Trade Accounts Receivable of the Company, (y) all

asserted customer disputes, offsets, defenses, counterclaims, returns, rejections and all reclaimed or repossessed merchandise or goods, and (z) all matters (other than general economic conditions and matters affecting the industry generally) adversely affecting the value of a material amount of the Inventory, all in such detail and format as CIT reasonably may require, provided that to the extent that any such matter would not have a Material Adverse Effect, the Company may disclose such matter to CIT when the Company provides CIT with the borrowing base certificate described in clause (i) above.

(5) Prior written notice of any change in the location of any Collateral to any location other than listed on Schedule 7.1 (b) and any material change in type, quantity, quality or mix of the Inventory.

(6) From time to time, on reasonable prior notice and subject to the limitations set forth in Section 7.2(a), access to the Company’s computers, electronic media, software programs (including any electronic records, contracts and signatures) and such other documentation and information relating to the Trade Accounts Receivable, Inventory and other Collateral as CIT reasonably may require.

(ii) The Company may deliver to CIT any borrowing base certificate, collateral report or other material that the Company is required to deliver to CIT under clauses (1), (2) and (3) of Section 7.2(g)(i) by e-mail or other electronic transmission (an “Electronic Transmission”), subject to the following terms:

(1) Each Electronic Transmission must be sent by the treasurer or chief financial officer of the Company (or any other authorized officer satisfactory to CIT), and must be addressed to the loan officer and the collateral analyst of CIT that handle the Company’s account, as designated by CIT from time to time to the Company in writing. If any Electronic Transmission is returned to the sender as undeliverable, the material included in such Electronic Transmission must be delivered to the intended recipient in the manner required by Section 12.6 hereof.

(2) Each certificate, collateral report or other material contained in an Electronic Transmission must be in a “pdf’ or other imaging format and, to the extent that such material must be certified by an officer of the Company under this Section 7.2(g). must contain the signature of the officer submitting the Electronic Transmission. As provided in Section 12.6. any signature on a certificate, collateral report or other material contained in an Electronic Transmission shall constitute a valid signature for purposes hereof. CIT may rely upon, and assume the authenticity of, any such signature, and any material containing such signature shall constitute an “authenticated” record for purposes of the Uniform Commercial Code and shall satisfy the requirements of any applicable statute of frauds.

(3) Each Electronic Transmission must contain the name and title of the officer of the Company transmitting the Electronic Transmission, and shall include following text in the body of the Electronic Transmission:

“Pursuant to the Financing Agreement dated April 26, 2006 between The CIT Group/Business Credit, Inc. (“CIT”) and Xxxxxxx-Xxxxx Nitrogen, Inc. now known as Rentech Energy Midwest Corporation (the “Company”), the undersigned [title of submitting officer] of the Company hereby delivers to CIT the Company’s [describe submitted reports]. The Company represents and warrants to CIT that the materials included in this Electronic Transmission are true, correct, and complete in all material respects. The name of the officer of the Company set forth in this e-mail constitutes the signature of such officer, and this e-mail shall constitute an authenticated record of the Company.”

(4) The Company agrees to maintain the original versions of all certificates, collateral reports and other materials delivered to CIT by means of an Electronic Transmission and agrees to furnish to CIT such original versions within five (5) Business Days of ClT’s request for such materials, signed and certified (to the extent required hereunder) by the officer submitting the Electronic Transmission.

(iii) The Company hereby authorizes CIT to regard the Company’s printed name or rubber stamp signature on assignment schedules or invoices as the equivalent of a manual signature by one of the Company’s authorized officers or agents. The Company’s failure to promptly deliver to CIT any schedule, report, statement or other information set forth in this Section 7.2(g) shall not affect, diminish, modify or otherwise limit CIT’s security interests in the Collateral.

(h) Financial Reporting. The Company agrees to furnish to CIT:

(i) within ninety (90) days after the end of each fiscal year of Rentech, a Balance Sheet of Rentech as at the close of such year, and consolidated and consolidating statements of profit and loss and cash flow of Rentech for such year, in each case with such consolidated statements being audited by independent public accountants selected by the Company and satisfactory to CIT (it being understood that Rentech’s present independent public accountants are presently acceptable to CIT), together with (x) the unqualified opinion as to financial statement of the accountants preparing such financial statements and (y) if requested by CIT, such accountants’ management practice letter;

(ii) within thirty (30) days after the end of each month that is not the end of a fiscal quarter of the Company, (w) a Balance Sheet of the Company as at the end of such month, (x) statements of profit and loss of the Company for such month and for the period commencing on the first day of the current fiscal year through the end of such month, (y) comparative statements of profit and loss of the Company for the same month and same fiscal year-to-date period in the prior fiscal year, provided that the foregoing shall not apply to periods prior to the closing date of the Acquisition, and (z) a summary report of all purchase and sale commitments, in each case, certified by the treasurer or chief financial officer of the Company (or any other authorized officer satisfactory to CIT);

(iii) within forty five (45) days after the end of each fiscal quarter of the Company, (w) a Balance Sheet of the Company as at the end of such fiscal quarter, (x) statements of profit and loss and cash flow of the Company for such fiscal quarter and for the period commencing on the first day

of the current fiscal year through the end of such fiscal quarter, (y) comparative statements of profit and loss and cash flow of the Company for the same fiscal quarter and same fiscal year-to-date period in the prior fiscal year, provided that the foregoing shall not apply to periods prior to the closing date of the Acquisition, and (z) a summary report of all purchase and sale commitments, in each case, certified by the treasurer or chief financial officer of the Company (or any other authorized officer satisfactory to CIT);

(iv) as and when filed by the Company, copies of all (x) financial reports, registration statements and other documents filed by the Company with the U.S. Securities and Exchange Commission, as and when filed by the Company, and (y) annual reports filed pursuant to ERISA in connection with each benefit plan of the Company subject to ERISA; and

(v) no later than thirty (30) days prior to the beginning of each fiscal year of the Company, monthly projections of the Company’s Balance Sheet and statements of profits and loss and cash flow of the Company, as well as monthly projected Net Availability for the Company for such fiscal year.

(vi) Each financial statement which Rentech or the Company is required to submit pursuant to clauses (i), (ii) and (iii) above must be accompanied by an officer’s certificate substantially in the form set forth on Exhibit A attached hereto, signed by the treasurer or chief financial officer of the Company (or any other authorized officer satisfactory to CIT). In addition, should the Company modify its accounting principles and procedures from those in effect on the Closing Date in any manner that would affect the calculations related to the covenants set forth in Section 7.3 of this Financing Agreement, the Company agrees to prepare and deliver to CIT statements of reconciliation in form and substance reasonably satisfactory to CIT.

(i) Asset Appraisals. From time to time upon the request of CIT, the Company agrees to permit CIT to perform appraisals of the Company’s Inventory. The Company agrees to reimburse CIT for the costs and expenses relating to one (1) Inventory appraisal in any twelve-month period, so long as no Event of Default shall have occurred and remain outstanding, and all such appraisals performed while an Event of Default remains outstanding. All appraisals shall be performed by qualified appraisers selected by CIT. To the extent that the Company is required by this Section 7.2(i) to reimburse CIT for ClT’s costs and expenses relating to appraisals, such costs and expenses shall constitute Out-of-Pocket Expenses.

(j) Business Qualification. The Company agrees to qualify to do business, and to remain qualified to do business and in good standing, in each jurisdiction where the failure to so qualify or to remain qualified or in good standing, would have a Material Adverse Effect.

(k) Anti-Money Laundering and Terrorism Regulations. Without limiting the generality of the foregoing, the Company agrees to comply with all applicable anti-money laundering and terrorism laws, regulations and executive orders in effect from time to time (including, without limitation, the USA Patriot Act (Pub. L. No. 107-56)). The Company acknowledges that CIT’s performance hereunder is subject to compliance with all such laws, regulations and executive orders, and in furtherance of the foregoing, the Company agrees to provide to CIT all information about the

Company’s ownership, officers, directors, customers and business structure as CIT reasonably may require to comply with, such laws, regulations and executive orders.

(l) Distribution Agreement. If the Distribution Agreement is amended in any material respect or is terminated or if there is a material non-performance by any party the Distribution Agreement without, in each case, the prior written consent of CIT, within 30 days, the Company will (i) provide to CIT such information as reasonably requested by CIT to describe the amendment or material non-performance and its effect on the Company (such information and such effect to be in form and substance reasonably acceptable to CIT) or (ii), in the case of a termination, provide to CIT a distribution or similar agreement in form and substance reasonably acceptable to CIT with an entity reasonably acceptable to CIT or make other arrangements reasonably acceptable to CIT for the sale of such Inventory that was subject to the Distribution Agreement.

7.3 Financial Covenants. Until termination of this Financing Agreement and the full and final payment and satisfaction of all Obligations, the Company agrees:

(a) Tangible Net Worth. To maintain as of the end of each month. Tangible Net Worth of not less than $61,000,000

(b) Fixed Charge Coverage. To maintain a Fixed Charge Coverage Ratio, calculated for each of the periods set forth below, of not less than:

Fiscal Period		Ratio

2-month period ending June 30, 2006		1.05 to 1.00
5-month period ending September 30, 2006		1.10 to 1.00
8-month period ending December 31, 2006		1.10 to 1.00
11 -month period ending March 31, 2007		1.10 to 1.00
12-month period ending June 30, 2007 and at each quarter-end thereafter		1.10 to 1.00

7.4 Negative Covenants. Until termination of this Financing Agreement and full and final payment and satisfaction of all Obligations, the Company agrees not to, and will cause each Guarantor not to:

(a) Liens and Encumbrances. Mortgage, assign, pledge, transfer or otherwise permit any lien, charge, security interest, encumbrance or judgment (whether as a result of a purchase money or title retention transaction, or other security interest, or otherwise) to exist on any of the Collateral or its other assets, whether now owned or hereafter acquired, except for the Permitted Encumbrances.

(b) Indebtedness. Incur or create any Indebtedness other than the Permitted Indebtedness.

(c) Sale of Assets. Sell, lease, assign, transfer or otherwise dispose of (x) Collateral, except as otherwise specifically permitted by this Financing Agreement, or (y) provided that Parent may assign its interest in the capital stock of the Company to

an affiliate, assets which do not constitute Collateral that have a book value in excess of $10,000,000.

(e) Corporate Change. (i) Merge or consolidate with any other entity, (ii) change its name or principal place of business, (iii) change its structure or organizational form, or reincorporate or reorganize in a new jurisdiction, (iv) enter into or engage in any operation or activity materially different from that presently being conducted by the Company or Guarantor, as the case may be; provided that the Company and any Guarantor may change its name, its principal place of business or its structure or organization form so long as the Company provides CIT with thirty (30) days prior written notice thereof and the Company and any Guarantor, as the case may be, executes and delivers to CIT, prior to making such change, all documents and agreements required by CIT in order to ensure that the liens and security interests granted to CIT hereunder continue in effect without any break or lapse in perfection.

(f) Guaranty Obligations. Assume, guarantee, endorse, or otherwise become liable upon the obligations of any person, firm, entity or corporation, except pursuant to the Guaranties and by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business.

(g) Dividends and Distributions. Declare or pay any dividend or distribution of any kind on, or purchase, acquire, redeem or retire, any of its equity interests (of any class or type whatsoever), whether now or hereafter issued and outstanding, provided, however, so long as no Default or Event of Default shall have occurred and be continuing and, as applicable, the Company or a Guarantor has sufficient working capital to pay its debts as such debts come due, if the Company or a Guarantor is a disregarded entity for tax purposes for any taxable year, the Company or a Guarantor, as applicable may pay cash dividends to its shareholders in an aggregate amount equal to such shareholders’ actual federal and state income tax liability for such taxable year (or portion thereof) attributable to the Company’s or a Guarantor’s taxable income, as applicable provided that (i) as a condition precedent to any such payment, the Company shall deliver to CIT a letter from its independent public accountants, in form and substance satisfactory to CIT, detailing the amount necessary to be applied to such shareholders’ tax liabilities, which letter may relate to the estimated tax payments for the next succeeding four quarters, and (ii) such payment or distribution shall be limited to the amounts specified in said letter.

(h) Investments. (i) Create any new subsidiary, or (ii) make any advance or loan to, or any investment in, any firm, entity, person or corporation, or (iii) acquire all or substantially all of the assets of, or any capital stock or any equity interests in, any firm, entity or corporation, other than current investments of the Company and any Guarantor, as the case may be, in existing subsidiaries of such entities.

(i) Related Party Transactions. Enter into any transaction, including, without limitation, any purchase, sale, lease, loan or exchange of properly, with any shareholder, officer, director, parent (direct or indirect), subsidiary (direct or indirect) or other person or entity under common control with the Company or any Guarantor, unless (i) such transaction otherwise is not prohibited by the provisions of this Financing Agreement, (ii) such transaction is in the ordinary

course of business and pursuant to the reasonable requirements of the Company or any Guarantor, as the case may be, and upon fair and reasonable terms, no less favorable to such entity than such entity could obtain in a comparable arms length transaction with an unrelated third party, and (iii) no Event of Default shall have occurred and remain outstanding at the time such transaction occurs, or would occur after giving effect to such transaction. CIT acknowledges that the Management Agreement as presented to CIT on or about the Closing Date does not violate this Section 7.4(i). provided, however, (i) the fees or other compensation payable by the Company thereunder shall not be increased; and (ii) the fees or other compensation payable by the Company thereunder shall not be pre-paid and shall not be paid by the Company if a Default or Event of Default shall have occurred and be continuing or would result thereby.

(j) Restricted Payments. (i) Make any payment of the principal of, or interest on, any Subordinated Debt, or purchase, acquire or redeem any of the Subordinated Debt, unless (x) such payment, purchase, acquisition or redemption is expressly permitted by the terms of the applicable Subordination Agreement and (y) no Default or Event of Default shall have occurred and remain outstanding on the date on which such payment or transaction occurs, or would occur as a result thereof; (ii) except as provided in Section 7.4(i) of this Financing Agreement with regard to the Management Agreement, pay any management, consulting or other similar fees to any shareholder, director, parent (direct or indirect), subsidiary (direct or indirect) or other person or entity under common control with the Company or any Guarantor.

SECTION 8. Interest. Fees and Expenses

8.1 Interest on Revolving Loans. Interest on the outstanding principal balance of the Revolving Loans that are Chase Bank Rate Loans shall be due and payable monthly on the first day of each month and shall accrue at a rate per annum equal to the Applicable Margin plus the Chase Bank Rate on the average net principal balance of such Revolving Loans at the close of each day during the immediately preceding month, as reflected by ClT’s System. On each Revolving Loan that is a LIBOR Loan, interest shall be due and payable on the LIBOR Interest Payment Date and shall accrue at a rate per annum equal to the Applicable Margin plus the applicable LIBOR on the outstanding principal balance of such LIBOR Loan. In the event of any change in said Chase Bank Rate, the rate set forth in the first sentence of this Section 8.1 shall change, effective as of the date of such change, so as to remain equal to the Applicable Margin plus the new Chase Bank Rate. All interest rates shall be calculated based on a 360-day year and actual days elapsed.

8.2 Default Interest Rate. Upon the occurrence of an Event of Default, (a) provided that CIT has given the Company written notice of such Event of Default (other than an Event of Default described in Section 10.1 (c) of this Financing Agreement, for which no written notice shall be required), all Obligations may, at the election of CIT, bear interest at the Default Rate of Interest until such Event of Default is waived, and (b) at CIT’s election at any time thereafter, interest on each outstanding LIBOR Loan shall be due and payable on the first day of each month, notwithstanding the Interest Period with respect thereto.

8.3 Fees and Expenses Relating to Letters of Credit.

(a) Letter of Credit Guaranty Fee. In consideration of the issuance of any Letter of Credit Guaranty by CIT or other assistance of CIT in obtaining Letters of Credit pursuant to Section 5 hereof, the Company agrees to pay to CIT a Letter of Credit Guaranty Fee equal to the Applicable Margin per annum on the face amount of each Letter of Credit. All Letter of Credit Guaranty Fees shall be due and payable monthly on the first day of each month.

(b) Charges of Issuing Bank. The Company agrees to reimburse CIT for any and all charges, fees, commissions, costs and expenses charged to CIT for the Company’s account by an Issuing Bank in connection with, or arising out of. Letters of Credit or out of transactions relating thereto, when charged to or paid by CIT, or as may be due upon any termination of this Financing Agreement.

8.4 Out-of Pocket Expenses. The Company agrees to reimburse CIT for all Out-of-Pocket Expenses when charged to or paid by CIT.

8.5 Line of Credit Fee. On the first day of each month, commencing on May 1, 2006, the Company agrees to pay to CIT the Line of Credit Fee.

8.6 Loan Facility Fee; Application of Deposits and Commitment Fee. To induce CIT to enter into this Financing Agreement and to extend to the Company the Revolving Line of Credit, the Company agrees to pay to CIT a Loan Facility Fee in the amount of $112,500, which shall be fully earned upon execution of this Financing Agreement by CIT and the Company. On or about the Closing Date, CIT shall credit the unused portion, if any, of the $25,000 commitment fee paid by the Company to CIT under the Proposal Letter to the Loan Facility Fee, and shall charge the Revolving Loan Account for the $87,500 balance of the Loan Facility Fee concurrently with CIT’s initial disbursement of loans hereunder. Any unused due diligence deposit held by CIT pursuant to the Proposal Letter shall be credited to the Revolving Loan Account.

8.7 Administrative Management Fee. On the Closing Date and on the first day of the month following the month in which each annual anniversary of the Closing Date occurs, the Company agrees to pay to CIT the Administrative Management Fee, which shall be fully earned when due.

8.8 Standard Operational Fees. In addition to the Administrative Management Fee and all Out-of-Pocket Expenses incurred by CIT in connection with any action taken under Section 7.2(a) hereof (but without duplication), the Company agrees to pay to CIT, the standard charges of CIT for each wire transfer made by CIT to or for the benefit of the Company (currently $30) and for Xxxx and Bradstreet searches conducted by CIT for the Company’s account (currently $65), provided that such standard charges may be increased by CIT from time to time. Such charges shall be due and payable in accordance with CIT’s standard practices, as in effect from time to time.

8.9 LIBOR Loans.

(a) Conditions Applicable to LIBOR Loans. The Company may elect to use LIBOR as to any Revolving Loans, convert any Chase Bank Rate Loan to a new LIBOR Loan or continue any

existing LIBOR Loan as a new LIBOR Loan on the last day of the Interest Period with respect to such existing LIBOR Loan, so long as:

(j) no Default or Event of Default shall have occurred and remain outstanding on the date on which such new LIBOR Loan is requested and on the first day of the Interest Period for such new LIBOR Loan;

(ii) the Company requests the new LIBOR Loan no later than three (3) Business Days preceding the first day of the Interest Period for such new LIBOR Loan (or three (3) Business Days prior to the expiration of any Interest Period, in the case of a continuation of an existing LIBOR Loan);

(iii) if CIT requests written confirmation of any new LIBOR Loan from the Company, the Company shall have signed and returned to CIT any such confirmation on or prior to the first day of the Interest Period for such new LIBOR Loan; and

(iv) with respect to the Interest Period selected by the Company for such new LIBOR Loan, (x) either (1) JPMorgan Chase Bank provides a LIBOR quote for such Interest Period or CIT otherwise determines the LIBOR for such Interest Period, as provided in the definition of LIBOR, or (2) the LIBOR for such Interest Period as quoted by JPMorgan Chase Bank or as determined by CIT adequately and fairly reflects the cost of maintaining or funding CIT’s loans bearing interest at LIBOR for such Interest Period, and (y) such Interest Period ends on or before the Termination Date.

Any LIBOR election must be for at least $150,000 and if greater, in integral multiples of $50,000, and there shall be no more than six (6) LIBOR Loans outstanding at one lime, Elections for LIBOR Loans shall be irrevocable once made. If any condition for a LIBOR election is not satisfied, then the requested new loan (or continuation of an existing LIBOR Loan) shall be made to the Company as a Chase Bank Rate Loan.

(b) Restrictions Affecting the Making or Funding of LIBOR Loans. Notwithstanding any other provision of this Financing Agreement to the contrary, if any law, regulation, treaty or directive, or any amendment thereto or change in the interpretation or application thereof, shall make it unlawful for CIT to make or maintain any LIBOR Loan, then (x) such LIBOR Loan shall convert automatically to a Chase Bank Rate Loan at the end of the applicable Interest Period, or such earlier date as may be required by such law, regulation, treaty or directive, and (y) the obligation of CIT thereafter to make or continue LIBOR Loans and to convert Chase Bank Rate Loans into LIBOR Loans hereunder shall be suspended until CIT determines that it is no longer unlawful to make and maintain LIBOR Loans as contemplated herein. In addition, in the event that, by reason of any Regulatory Change (other than reserve requirements included in the calculation of the LIBOR Rate), CIT either (x) incurs any material additional costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of CIT which includes deposits by reference to which the interest rate on LIBOR Loans is determined hereunder, or a category of extensions of credit or other assets of CIT which includes LIBOR Loans, or (y) becomes subject to any material restrictions on the amount of such a category of liabilities or assets which CIT may hold, then if CIT so elects by written notice to the Company, the obligation of CIT thereafter to

make or continue LIBOR Loans and to convert Chase Bank Rate Loans into LIBOR Loans hereunder shall be suspended until such Regulatory Change ceases to be in effect.

(c) Inability to Determine LIBOR. Notwithstanding any other provision of this Financing Agreement to the contrary, if CIT determines in the exercise of its reasonable business judgment (which determination shall be conclusive and binding upon the Company) that by reason of circumstances affecting the interbank LIBOR market, adequate and reasonable means do not exist for ascertaining LIBOR applicable to an Interest Period with respect to any election of a new LIBOR Loan, CIT shall give written notice of such determination to the Company prior to the effective date of such election. Upon receipt of such notice, the Company may cancel the Company’s request for such new LIBOR Loan, in which case the requested LIBOR Loan shall be made as a Chase Bank Rate Loan. Until such notice has been withdrawn by CIT, the obligation of CIT thereafter to make or continue LIBOR Loans and to convert Chase Bank Rate Loans into LIBOR Loans hereunder shall be suspended until CIT determines that adequate and reasonable means again exist for ascertaining LIBOR applicable to an Interest Period with respect to any election of a new LIBOR Loan.

(d) Compensation for Costs. The Company hereby agrees to pay to CIT, on demand, any additional amounts necessary to compensate CIT for any costs incurred by CIT in making any conversions from LIBOR Loans to Chase Bank Rate Loans in accordance with this Section 8.9. including, without limitation, breakage costs provided for in Section 8.10 of this Financing Agreement.

(e) Loan Participants. For purposes of this Section 8.9. the term “CIT” shall include any financial institution that purchases from CIT a participation in the loans made by CIT to the Company hereunder.

8.10 LIBOR Breakage Costs and Fees. In the event that the Company (i) pays all or any part of the principal amount of a LIBOR Loan on a date prior to the last day of an Interest Period for such LIBOR Loan, (ii) fails to borrow a LIBOR Loan, or fails to convert a Chase Bank Rate Loan to a LIBOR Loan, on the date for such borrowing or conversion specified in the relevant request to CIT, or (iii) fails to pay to CIT the principal of, or interest on, any LIBOR Loan when due, the Company agrees to pay to CIT (and any financial institution that purchases from CIT a participation in the loans made by CIT to the Company hereunder), on demand, such amount as shall compensate CIT and such financial institution for any actual loss, cost or expense that CIT or such financial institution may sustain or incur as a result of such event (including, without Limitation, any interest or fees payable by CIT or such financial institution to lenders or depositors of funds obtained by CIT or such financial institution in order to make or maintain any LIBOR Loans under this Financing Agreement), and (z) in the case of a prepayment of any LIBOR Loan, the excess (if any) of the amount of interest that would have accrued on such loan from the first day of the Interest Period to the date of prepayment, assuming that such loan was a Chase Bank Rate Loan, over the amount of interest that actually accrued on such loan from the first day of the Interest Period to the date of prepayment. The determination by CIT of the amount of any such loss, cost or expense described in clause (y) of the preceding sentence, when set forth in a written notice to the Company containing CIT’s calculations thereof in reasonable detail, shall be conclusive and binding upon the Company, in the absence of manifest error.

8.11 Capital Adequacy. In the event that CIT (or any financial institution that purchases from CIT a participation in the loans made by CIT to the Company hereunder), subsequent to the Closing Date, determines in the exercise of its reasonable business judgment that (x) any change in applicable law, rule, regulation or guideline regarding capital adequacy, or (y) any change in the interpretation or administration thereof, or (z) compliance by CIT or such financial institution with any new request or directive regarding capital adequacy (whether or not having the force of law) of any central bank or other governmental or regulatory authority, has or would have the effect of reducing the rate of return on CIT’s or such financial institution’s capital as a consequence of its obligations hereunder to a level below that which CIT or such financial institution could have achieved but for such change or compliance (taking into consideration CIT’s or such financial institution’s policies with respect to capital adequacy) by an amount deemed material by CIT or such financial institution in the exercise of their reasonable business judgment, the Company agrees to pay to CIT, no later than five (5) days following demand by CIT, such additional amount or amounts as will compensate CIT or such financial institution for such reduction in rate of return, In determining such amount or amounts, CIT and such financial institution may use any reasonable averaging or attribution methods. The protection of this Section 8.12 shall be available to CIT and such financial institution regardless of any possible contention of invalidity or inapplicability with respect to the applicable law, regulation or condition, A certificate of CIT or such financial institution setting forth such amount or amounts as shall be necessary to compensate CIT or such financial institution with respect to this Section 8.12 and the calculation thereof, when delivered to the Company, shall be conclusive and binding on the Company absent manifest error. In the event CIT or such financial institution exercises its rights pursuant to this Section 8.12. and subsequent thereto determines that the amounts paid by the Company exceeded the amount which CIT or such financial institution actually required to compensate CIT or such financial institution for any reduction in rate of return on its capital, such excess shall be returned to the Company by CIT or such financial institution, as the case may be.

8.12. Taxes. Reserves and Other Conditions. In the event that any applicable law, treaty or governmental regulation, or any change therein or in the interpretation or application thereof, or compliance by CIT (or by any financial institution that purchases from CIT a participation in the loans made by CIT to the Company hereunder) with any new request or directive (whether or not having the force of law) of any central bank or other governmental or regulatory authority, shall:

(a) subject CIT or such financial institution to any tax of any kind whatsoever with respect to this Financing Agreement or the other Loan Documents, or change the basis of taxation of payments to CIT or such financial institution of principal, fees, interest or any other amount payable hereunder or under any of the other Loan Documents (except for changes in the rate of tax on the overall net income of CIT or such financial institution by the federal government or other jurisdiction in which it maintains its principal office);

(b) impose, modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in or for the account of, advances or loans by, or other credit extended by CIT or such financial institution by reason of or in respect to this Financing

Agreement and the Loan Documents, including (without limitation) pursuant to Regulation D of the Board of Governors of the Federal Reserve System; or

(c) impose on CIT or such financial institution any other condition with respect to this Financing Agreement or any other document;

and the result of any of the foregoing is to (i) increase the cost to CIT of making, renewing or maintaining CIT’s loans hereunder (or the cost to such financial institution in participating in such loans) by an amount deemed material by CIT or such financial institution in the exercise of its reasonable business judgment, or (ii) reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the loans made hereunder by an amount that CIT or such financial institution deems to be material in the exercise of its reasonable business judgment, the Company agrees to pay to CIT, no later than five (5) days following demand by CIT, such additional amount or amounts as will compensate CIT or such financial institution for such increase in cost or reduction in payment, as the case may be. A certificate of CIT or such financial institution setting forth such amount or amounts as shall be necessary to compensate CIT or such financial institution with respect to this Section 8.13 and the calculation thereof, when delivered to the Company, shall be conclusive and binding on the Company absent manifest error. In the event CIT or such financial institution exercises its rights pursuant to this Section 8.13. and subsequent thereto determines that the amounts paid by the Company in whole or in part exceeded the amount which CIT or such financial institution actually required to compensate CIT or such financial institution for any increase in cost or reduction in payment, such excess shall be returned to the Company by CIT or such financial institution, as the case may be.

8.13 Authority to Charge Revolving Loan Account. The Company hereby authorizes CIT to charge the Revolving Loan Account with the amount of all payments due under this Section 8 as such payments become due. Any amount charged to the Revolving Loan Account shall be deemed a Chase Bank Rate Loan hereunder and shall bear interest at the rate provided in Section 8.1 (or Section 8.2. if applicable) of this Financing Agreement. The Company confirms that any charges which CIT may make to the Revolving Loan Account as provided herein will be made as an accommodation to the Company and solely at CIT’s discretion.

8.14 Participations. CIT may (provided that no Event of Default has occurred and is continuing, subject to the prior written consent of the Company, such consent not to be unreasonably withheld) sell participations to one or more banks or other financial institutions in or to all or a portion of its rights and obligations under this Financing Agreement; provided however, that (i) CIT’s obligations under this Financing Agreement shall remain unchanged, (ii) CIT shall remain solely responsible to the Company for the performance of such obligations, (iii) CIT shall remain the holder of the Obligations for all purposes of this Agreement; and (iv) the agreement providing for the participation shall bind the participating financial institution the transfer provisions of Section 8.15 of this Financing Agreement. Subject to Section 8.15 of this Financing Agreement, financial institutions that purchase participations from CIT in accordance with this Section 8.14 shall be entitled to the benefits of Sections 8.9, 8.10, 8.11 and 8.12 of this Financing Agreement as set forth therein.

8.15 Replacement of a Participant. A financial institution that purchases a participation from CIT will become a “Replacement Candidate” if it has made a demand under Section 8.9, 8.10. 8.11 or 8.12 of this Financing Agreement. If a financial institution that purchases a participation from CIT becomes a Replacement Candidate, the Company shall have the right to require CIT to transfer to another financial institution selected by (he Company and reasonably satisfactory to CIT, the participation held by such Replacement Candidate in accordance with Section 8.14 ; provided, that CIT shall not have any obligation to the Company to find any such other financial institution and in order for the Company to replace a Replacement Candidate, and the Company must require such replacement within three (3) months of the date the Replacement Candidate became a Replacement Candidate.

SECTION 9. Powers

9.1 Authority. The Company hereby authorizes CIT, or any person or agent which CIT may designate, at the Company’s cost and expense, to exercise all of the following powers, which authority shall be irrevocable until the termination of this Financing Agreement and the full and final payment and satisfaction of the Obligations:

(a) To receive, take, endorse, sign, assign and deliver, all in the name of CIT or the Company, any and all checks, notes, drafts, and other documents or instruments relating to the Collateral;

(b) To receive, open and dispose of all mail addressed to the Company and to notify postal authorities to change the address for delivery thereof to such address as CIT may designate;

(c) To request from customers indebted on Accounts at any time, in the name of CIT, information concerning the amounts owing on the Accounts;

(d) To request from customers indebted on Accounts at any time, in the name of the Company, any certified public accountant designated by CIT or any other designee of CIT, information concerning the amounts owing on the Accounts;

(e) To transmit to customers indebted on Accounts notice of CIT’s interest therein and to notify customers indebted on Accounts to make payment directly to CIT for the Company’s account; and

(f) To take or bring, in the name of CIT or the Company, all steps, actions, suits or proceedings deemed by CIT necessary or desirable to enforce or effect collection of the Accounts.

9.2 Limitations on Exercise. Notwithstanding any other provision of this Financing Agreement to the contrary, the powers set forth in Sections 9.1(b), (c), (e) and (f) may only be exercised if an Event of Default shall have occurred and remain outstanding.

SECTION 10. Events of Default and Remedies

10.1 Events of Default. Each of the following events shall constitute an “Event of Default” under this Agreement:

(a) the cessation of the business of the Company or any Guarantor, or the calling of a meeting of the creditors of the Company or any Guarantor for purposes of compromising its debts and obligations;

(b) the failure of either the Company or any Guarantor to generally meet its debts as those debts mature;

(c) (i) the commencement by the Company or any Guarantor of any bankruptcy, insolvency, arrangement, reorganization, receivership, assignment for the benefit of creditors or similar proceedings under any federal or state law; or (ii) the commencement against the Company or any Guarantor of any bankruptcy, insolvency, arrangement, reorganization, receivership, assignment for the benefit of creditors or similar proceeding under any federal or state law by creditors of any of them, but only if such proceeding is not contested by the Company or any Guarantor within ten (10) days and not dismissed or vacated within sixty (60) days of commencement, or any of the actions or relief sought in any such proceeding shall occur or be authorized by the Company or any Guarantor;

(d) the breach or violation by the Company of any warranty, representation or covenant contained in this Financing Agreement (other than those referred to in Section 10.1(e) below), provided that such breach or violation shall not be deemed to be an Event of Default unless the Company fails to cure such breach or violation to CIT’s reasonable satisfaction within ten (10) days from the date of such breach or violation;

(e) the breach or violation by the Company of any warranty, representation or covenant contained in Sections 3.2, 6.3, 6.4, 6.5, 7.2(c), 7.2(d), 7.2(g)(i), 7.3 and 7.4;

(f) the failure of the Company to pay any of the Obligations within five (5) Business Days of the due date thereof, provided that nothing contained herein shall prohibit CIT from charging such amounts to the Revolving Loan Account on the due date thereof;

(g) the Company shall (i) engage in any “prohibited transaction” as defined in ERISA, (ii) incur any “accumulated funding deficiency” as defined in ERISA, (iii) incur any ‘reportable event” as defined in ERISA, (iv) terminate any “plan”, as defined in ERISA or (v) become involved in any proceeding in which the Pension ..Benefit Guaranty Corporation shall seek appointment, or is appointed, as trustee or administrator of any “plan”, as defined in ERISA, and with respect this Section 10.1(g), such event or condition either (x) remains uncured for a period of thirty (30) days from date of occurrence and (y) could, in CIT’s reasonable business judgment, subject the Company to any tax, penalty or other liability having a Material Adverse Effect;

(h) the occurrence of any default or event of default (after giving effect to any applicable grace or cure period) under any of the other Loan Documents, or any of the other Loan Documents ceases to be valid, binding and enforceable in accordance with its terms;

(i) the occurrence of any default or event of default (after giving effect to any applicable grace or cure period) under any instrument or agreement evidencing or governing (i) the Subordinated Debt or (ii) other Indebtedness of the Company having a principal amount in excess of $250,000;

(j) the Company shall modify the terms or provisions of any agreement, instrument or other document relating to any Subordinated Debt without CIT’s prior written consent, unless such modification is permitted by the applicable Subordination Agreement;

(k) a Change of Control shall occur;

(1) a final judgment for the payment of money in excess of $250,000 shall be rendered against the Company or any Guarantor (other than a judgment as to which a financially sound and reputable insurance company has acknowledged coverage of such claim in writing), and either (i) within thirty (30) days after the entry of such judgment, shall not have been discharged or stayed pending (or if stayed pending appeal, shall not have been discharged within thirty (30) days after the entry of a final order of affirmance on appeal), or (ii) enforcement proceedings shall be commenced by any holder of such judgment; or

(m) any Guarantor who is a natural person shall die, or any Guarantor shall attempt to terminate its Guaranty or deny that such Guarantor has any liability thereunder, or any Guaranty shall be declared null and void and of no further force and effect.

10.2 Remedies With Respect to Outstanding Loans. Upon the occurrence and during the continuation of a Default or an Event of Default, at the option of CIT, all loans, advances and extensions of credit provided for in Sections 3 and 5 of this Financing Agreement shall be made in CIT’s sole discretion, and the obligation of CIT to make Revolving Loans and to assist the Company in opening Letters of Credit shall cease unless such Default is cured to CIT’s satisfaction or such Event of Default is waived in accordance herewith. In addition, upon the occurrence of an Event of Default, CIT may, at its option (a) declare all Obligations immediately due and payable, (b) charge the Company the Default Rate of Interest on all then outstanding or thereafter incurred Obligations in lieu of the interest provided for in Sections 8.1 of this Financing Agreement, provided that CIT has given the Company written notice of such Event of Default if required by Section 8.2. and (c) immediately terminate this Financing Agreement upon notice to the Company. Notwithstanding the foregoing, (x) CIT’s commitment to make loans, advances and extensions of credit provided for in Sections 3 and 5 of this Financing Agreement automatically shall terminate without any declaration, notice or demand by CIT upon the commencement of any proceeding described in clause (ii) of Section 10.1(c), and (y) this Financing Agreement automatically shall terminate and all Obligations shall become due and payable immediately without any declaration, notice or demand by CIT, upon the commencement of any proceeding described in clause (i) of Section 10.1(c) or the occurrence of an Event of Default described in clause (ii) of Section 10.1 (c). The exercise of any option is not exclusive of any other option that may be exercised at any time by CIT.

10.3 Remedies With Respect to Collateral. Immediately after the occurrence and during the continuation of an Event of Default, CIT may, at its option, to the extent permitted by applicable

law: (a) remove from any premises where same may be located any and all books and records, computers, electronic media and software programs associated with any Collateral (including electronic records, contracts and signatures pertaining thereto), documents, instruments and files, and any receptacles or cabinets containing same, relating to the Accounts, and CIT may use, at the Company’s expense, such of the Company’s personnel, supplies or space at the Company’s places of business or otherwise, as may be necessary to properly administer and control the Accounts or the handling of collections and realizations thereon; (b) bring suit, in the name of the Company or CIT, and generally shall have all other rights respecting the Accounts, including, without limitation, the right to (i) accelerate or extend the time of payment, (ii) settle, compromise, release in whole or in pan any amounts owing on any Accounts and (iii) issue credits in the name of the Company or CIT; (c) sell, assign and deliver the Collateral and any returned, reclaimed or repossessed merchandise, with or without advertisement, at public or private sale, for cash, on credit or otherwise, at ClT’s sole option and discretion, and CIT may bid or become a purchaser at any such sale, free from any right of redemption, which right is hereby expressly waived by the Company; (d) foreclose ClT’s security interests in the Collateral by any available judicial procedure, or take possession of any or all of the Collateral without judicial process, and to enter any premises where any Collateral may be located for the purpose of taking possession of or removing the same; and (e) exercise any other rights and remedies provided in law, in equity, by contract or otherwise. To the extent not prohibited by applicable law, CIT shall have the right, without notice or advertisement, to sell, lease, or otherwise dispose of all or any part of the Collateral whether in its then condition or after further preparation or processing, in the name of the Company or CIT, or in the name of such other party as CIT may designate, either at public or private sale or at any broker’s board, in lots or in bulk, for cash or for credit, with or without warranties or representations (including, without limitation, warranties of title, possession, quiet enjoyment and the like), and upon such other terms and conditions as CIT in its sole discretion may deem advisable, and CIT shall have the right to purchase at any such sale. If any Inventory shall require rebuilding, repairing, maintenance or preparation, CIT shall have the right, at its option, to do such of the aforesaid as is necessary, for the purpose of putting the Inventory in such saleable form as CIT shall deem appropriate. The Company agrees, at the request of CIT, to assemble the Inventory, and to make it available to CIT at premises of the Company or elsewhere and to make available to CIT the premises and facilities of the Company for the purpose of CIT s taking possession of, removing or putting the Inventory in saleable form. If notice of intended disposition of any Collateral is required by law, it is agreed that ten (10) days notice shall constitute reasonable notification and full compliance with the law. The net cash proceeds resulting from ClT’s exercise of any of the foregoing rights (after deducting all Out-of-Pocket Expenses relating thereto) shall be applied by CIT to the payment of the Obligations, whether due or to become due, in such order as CIT may elect, and the Company shall remain liable to CIT for any deficiencies, and CIT in turn agrees to remit to the Company or its successors or assigns, any surplus resulting therefrom. The enumeration of the foregoing rights is not intended to be exhaustive and the exercise of any right shall not preclude the exercise of any other right of CIT under applicable law or the other Loan Documents, all of which shall be cumulative.

10.4 General Indemnity. In addition to the Company’s agreement to reimburse CIT for Out-of-Pocket Expenses, but without duplication, the Company hereby agrees to indemnify CIT and its officers, directors, employees, attorneys and agents (each, an “Indemnified Party”) from, and to defend and hold each Indemnified Party harmless against, any and all losses, liabilities, obligations,

claims, actions, judgments, suits, damages, penalties, costs, fees, expenses (including reasonable attorney’s fees) of any kind or nature which at any time may be imposed on, incurred by, or asserted against, any Indemnified Party:

(a) as a result of CIT’s exercise of (or failure to exercise) any of CIT’s rights and remedies hereunder, including, without limitation, (i) any sale or transfer of the Collateral, (ii) the preservation, repair, maintenance, preparation for sale or securing of any Collateral, and (iii) the defense of CIT’s interests in the Collateral (including the defense of claims brought by the Company, as a debtor-in-possession or otherwise, any secured or unsecured creditors of the Company, or any trustee or receiver in bankruptcy);

(b) as a result of any environmental pollution, hazardous material or environmental clean-up relating to the Real Estate, the Company’s operation and use of the Real Estate, and the Company’s off-site disposal practices;

(c) arising from or relating to (i) the maintenance and operation of any Depository Account, (ii) any Depository Account Control Agreements and (iii) any action taken (or failure to act) by any Indemnified Party with respect thereto;

(d) in connection with any regulatory investigation or proceeding by any regulatory authority or agency having jurisdiction over the Company; and

(e) otherwise relating to or arising out of the transactions contemplated by this Financing Agreement and the other Loan Documents, or any action taken (or failure to act) by any Indemnified Party with respect thereto;

provided that an Indemnified Party’s conduct in connection with the any of the foregoing matters does not constitute gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction. This indemnification shall survive the termination of this Financing Agreement and the payment and satisfaction of the Obligations. CIT may from time to time establish Availability Reserves with respect to claims asserted which are covered by this indemnity as CIT may deem advisable in the exercise of its reasonable business judgment, and upon termination of this Financing Agreement, CIT may hold such reserves as cash reserves as security for claims asserted which are covered by this indemnity.

SECTION 11. Termination

Except as otherwise provided in Section 10.2 hereof, CIT may terminate this Financing Agreement and the Revolving Line of Credit only as of the initial or any subsequent Termination Date, and then only by giving the Company at least sixty (60) days prior written notice of termination. The Company may terminate this Financing Agreement at any time prior to any Termination Date upon thirty (30) days prior written notice to CIT. THIS FINANCING AGREEMENT, UNLESS TERMINATED AS HEREIN PROVIDED, SHALL AUTOMATICALLY CONTINUE FROM TERMINATION DATE TO TERMINATION DATE. All Obligations shall become due and payable in full on the date of any termination

hereunder and, pending a final accounting of the Obligations, CIT may withhold any credit balances in the Revolving Loan Account (unless supplied with an indemnity satisfactory to CIT) as a cash reserve to the extent necessary to cover any contingent Obligation then outstanding, including, but not limited to, an amount equal to 110% of the face amount of any outstanding Letters of Credit All of ClT’s rights, liens and security interests granted pursuant to the Loan Documents shall continue after any termination of this Financing Agreement until all Obligations have been fully and finally paid and satisfied.

SECTION 12. Miscellaneous

12.1 Waivers. The Company hereby waives diligence, demand, presentment, protest and any notices thereof as well as notices of nonpayment, intent to accelerate and acceleration. No waiver of an Event of Default by CIT shall be effective unless such waiver is in writing and signed by CIT. No delay or failure of CIT to exercise any right or remedy hereunder, whether before or after the happening of any Event of Default, shall impair any such right or remedy, or shall operate as a waiver of such right or remedy, or as a waiver of such Event of Default. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion, No single or partial exercise by CIT of any right or remedy precludes any other or further exercise thereof, or precludes any other right or remedy.

12.2 Entire Agreement; Amendments. This Financing Agreement and the other Loan Documents; (a) constitute the entire agreement between the Company and CIT; (b) supersede any prior agreements (including the agreements set forth in the Proposal Letter); (c) may be amended only by a writing signed by the Company and CIT; and (d) shall bind and benefit the Company and CIT and their respective successors and assigns. Should the provisions of any other Loan Document conflict with the provisions of this Financing Agreement, the provisions of this Financing Agreement shall apply and govern. This Financing Agreement, any other Loan Document and any subsequent amendment to any of them may be executed in several counterparts, each of which shall be construed together as one original. Facsimile signatures on this Financing Agreement, any other Loan Document and any subsequent amendment to any of them shall be considered as original signatures. This Financing Agreement, any other Loan Document and any subsequent amendment to any of them may be executed in several counterparts, each of which shall be construed together as one original. Facsimile signatures on this Financing Agreement, any other Loan Document and any subsequent amendment to any of them shall be considered as original signatures.

12.3 Usury Limit. In no event shall the Company, upon demand by CIT for payment of any indebtedness relating hereto, by acceleration of the maturity thereof, or otherwise, be obligated to pay interest and fees in excess of the amount permitted by law. Regardless of any provision herein or in any agreement made in connection herewith, CIT shall never be entitled to receive, charge or apply, as interest on any indebtedness relating hereto, any amount in excess of the maximum amount of interest permissible under applicable law. If CIT ever receives, collects or applies any such excess, it shall be deemed a partial repayment of principal and treated as such, If as a result, the entire principal amount of the Obligations is paid in full, any remaining excess shall be refunded to the Company. This Section 12.3 shall control every other provision of the Financing Agreement, the other Loan Documents and any other agreement made in connection herewith.

12.4 Severability. If any provision hereof or of any other Loan Document is held to be illegal or unenforceable, such provision shall be fully severable, and the remaining provisions of the applicable agreement shall remain in full force and effect and shall not be affected by such provision’s severance. Furthermore, in lieu of any such provision, there shall be added automatically as a part of the applicable agreement a legal and enforceable provision as similar in terms to the severed provision as may be possible.

12.5 WAIVER OF JURY TRIAL: SERVICE OF PROCESS; CONSENT TO JURISDICTION. THE COMPANY AND CIT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER. THE COMPANY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED. IN NO EVENT WILL CIT BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE PLEDGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF CIT TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE PLEDGOR AGAINST CIT OR ANY AFFILIATE OF CIT INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

12.6 Notices. Except as otherwise herein provided, any notice or other communication required hereunder shall be in writing (messages sent by e-mail or other electronic transmission (other than by telecopier) shall not constitute a writing, however any signature on a document or other writing that is transmitted by e-mail or telecopier shall constitute a valid signature for purposes hereof), and shall be deemed to have been validly served, given or delivered when received by the recipient if hand delivered, sent by commercial overnight courier or sent by facsimile, or three (3) Business Days after deposit in the United States mail, with proper first class postage prepaid and addressed to the party to be notified as follows:

(a) if to CIT, at:

The CIT Group/Business Credit, Inc.

1211 Avenue of the Americas, 00xx Xxxxx

Xxx Xxxx, XX 00000

Attn: Regional Credit Manager

Telecopier No.: (000) 000-0000;

(b) if to the Company at:

Rentech Development Corporation

0000 00^xx Xxxxxx, Xxxxx 000

Xxxxxx, Xxxxxxxx 00000

Attn: General Counsel

Telecopier No.: (000) 000-0000;

Xxxxxx & Xxxxxxx LLP,

633 W, 5th Street, Suite 4000

Xxx Xxxxxxx, Xxxxxxxxxx 00000

Attn: Xxxx Xxxx, Esq.

Telecopier No.: (000) 000-0000.

12.7 CHOICE OF LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.

IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement to be executed, accepted and delivered, by their proper and duly authorized officers as of the date set forth above.

THE COMPANY:			CIT:

XXXXXXX-XXXXX NITROGEN, INC.			THE CIT GROUP/BUSINESS CREDIT, INC.


By:	/s/ Xxxxxxx X. Xxxxxx		By:	/s/ Xxxx X. Xxxxxxx
Title:		Vice President	Title:		Senior	Vice President

EXHIBIT A

COMPLIANCE CERTIFICATE

[Date]

The CIT Group/Business Credit, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000

RE: Financing Agreement dated as of April 26, 2006 (the “Financing Agreement”) between The CIT Group/Business Credit, Inc. (“CIT”) and Xxxxxxx-Xxxxx Nitrogen, Inc. [now known as Rentech Energy Midwest Corporation] (the “Company”)

Ladies and Gentlemen:

Reference is made to the Financing Agreement. Capitalized terms used herein and not specifically defined shall have the meanings given to such terms in the Financing Agreement.

Pursuant to Section 7.2(h) of the Financing Agreement, I enclose the Company’s financial statements for the month ended , 200 (the “Reporting Month”) and the fiscal year-to-date period ended , 200 . As the of the Company, I hereby certify to CIT that: (a) the financial statement(s) present fairly and accurately in all material respects the Company’s financial condition at the end of the particular accounting periods covered by such financial statements, as well as the Company’s operating results during such accounting periods, subject to year-end audit adjustments; (b) during the Reporting Month, (i) to my knowledge, there has occurred no Default or Event of Default under the Financing Agreement, or, if I have knowledge that any Default or Event of Default has occurred during such period, a detailed description thereof is set forth on the Exhibit attached hereto, and (ii) die Company has not received any notice of cancellation with respect to its property insurance policies; and (c) Exhibit attached hereto sets forth detailed calculations showing compliance with all financial covenants contained in the Financing Agreement, for the periods of measurement covered by or ending on the last day of the Reporting Month and required to be met as of such date

Executed and delivered on behalf of the Company.

Very truly yours,

[attach appropriate exhibits]

Schedule 1.1(a) - Existing Indebtedness

Intercompany Debt in the amount of $68,690,638.00, owing from Rentech Development Corporation to Rentech, Inc.

Schedule 7.1(b) – Company and Collateral Information

Exact Company Name in State of
Incorporation or Formation: Xxxxxxx-Xxxxx Nitrogen, Inc.

State of Incorporation or Formation: Delaware

F.E.I.N.: 00-0000000

State Organizational No.: 0000-000-0

Address of Chief Executive Office: 00000 Xxxxxxx 00 Xxxx, Xxxx Xxxxxxx, XX 00000

Collateral Locations: 00000 Xxxxxxx 00 Xxxx, Xxxx Xxxxxxx, XX 00000

Schedule 7.1(f) – Environmental Matters

None.

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FINANCING AGREEMENT

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